UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
__________________________________________________________ 
FORM 10-Q
 
 __________________________________________________________ 
(Mark One)
ý☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 30, 2017June 27, 2020
or
¨☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 1-36214
__________________________________________________________ 
Hologic, Inc.HOLOGIC, INC.
(Exact name of registrant as specified in its charter)

__________________________________________________________
Delaware04-2902449
(State or other jurisdiction of incorporation)incorporation or organization)(I.R.S. Employer Identification No.)
250 Campus Drive,
Marlborough, Massachusetts
01752
Marlborough,
Massachusetts
01752
(Address of principal executive offices)(Zip Code)
(508) 263-2900
(Registrant’s telephone number, including area code)

__________________________________________________________
*Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par valueHOLXNASDAQ
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý☒    No  ¨☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý☒    No  ¨☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check One):
Large accelerated filerý☒Accelerated filer¨☐
Non-accelerated filer
¨ (Do not check if a smaller reporting company)
☐		Smaller reporting company¨☐
Emerging growth company¨☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)Act).    Yes  ¨☐    No  ý☒
As of February 5, 2018, 276,529,054July 23, 2020, 258,985,242 shares of the registrant’s Common Stock, $0.01 par value, were outstanding.


Table of Contents

HOLOGIC, INC.
INDEX
 
Page
Page
PART I – FINANCIAL INFORMATION
Item 1.
Consolidated Statements of IncomeOperations for the Three and Nine Months Ended December 30, 2017June 27, 2020 and December 31, 2016June 29, 2019

34

45

56
Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended June 27, 2020 and Year Ended September 28, 2019

7

610
712
Item 2.
3240
Item 3.
4958
Item 4.
5059
Item 1.
5260
Item 1A.
5260
Item 2.
5261
Item 6.
5362
5563
EXHIBITS



2
Table of Contents

PART I – FINANCIAL INFORMATION
 
Item 1.Financial Statements (unaudited)

Item 1. Financial Statements (unaudited)
HOLOGIC, INC.
CONSOLIDATED STATEMENTS OF INCOMEOPERATIONS
(Unaudited)

(In millions, except number of shares, which are reflected in thousands, and per share data)
 Three Months EndedNine Months Ended
 June 27,
2020		June 29,
2019		June 27,
2020		June 29,
2019
Revenues:
Product$701.6  $704.0  $2,024.5  $2,054.8  
Service and other121.3  148.4  405.0  446.6  
822.9  852.4  2,429.5  2,501.4  
Costs of revenues:
Product225.1  235.8  685.9  700.8  
Amortization of acquired intangible assets62.9  78.6  189.4  239.9  
Impairment of intangible assets and equipment—  —  25.8  374.6  
Service and other68.8  93.2  232.7  264.7  
Gross profit466.1  444.8  1,295.7  921.4  
Operating expenses:
Research and development55.1  61.4  165.5  171.8  
Selling and marketing103.5  143.6  359.0  423.1  
General and administrative105.3  79.9  260.3  248.5  
Amortization of acquired intangible assets10.2  11.9  29.5  40.1  
Impairment of intangible assets and equipment—  —  4.4  69.2  
Restructuring and divestiture charges1.0  2.7  4.8  6.0  
275.1  299.5  823.5  958.7  
Income (loss) from operations191.0  145.3  472.2  (37.3) 
Interest income0.5  1.2  4.0  3.3  
Interest expense(27.4) (35.1) (91.5) (106.0) 
Debt extinguishment loss—  —  —  (0.8) 
Other income, net4.3  2.9  0.1  5.8  
Income (loss) before income taxes168.4  114.3  384.8  (135.0) 
Provision (benefit) for income taxes32.0  20.4  (232.1) (54.9) 
Net income (loss)$136.4  $93.9  $616.9  $(80.1) 
Net loss attributable to noncontrolling interest(1.5) —  (3.4) —  
Net income (loss) attributable to Hologic$137.9  $93.9  $620.3  $(80.1) 
Net income (loss) per common share attributable to Hologic:
Basic$0.53  $0.35  $2.35  $(0.30) 
Diluted$0.53  $0.35  $2.34  $(0.30) 
Weighted average number of shares outstanding:
Basic259,870  268,932  263,667  269,586  
Diluted261,047  270,789  265,092  269,586  
 Three Months Ended
 December 30,
2017		 December 31,
2016
Revenues:   
Product$650.7
 $613.4
Service and other140.4
 121.0
 791.1
 734.4
Costs of revenues:   
Product213.7
 198.3
Amortization of acquired intangible assets79.8
 73.5
Service and other73.1
 57.8
Gross Profit424.5
 404.8
Operating expenses:   
Research and development54.8
 54.4
Selling and marketing139.5
 110.0
General and administrative77.9
 69.8
Amortization of acquired intangible assets14.4
 21.4
Restructuring charges3.8
 3.2
 290.4
 258.8
Income from operations134.1
 146.0
Interest income0.8
 0.3
Interest expense(41.0) (40.4)
Debt extinguishment loss(1.0) —
Other income, net2.9
 10.2
Income before income taxes95.8
 116.1
(Benefit) provision for income taxes(310.9) 29.6
Net income$406.7
 $86.5
Net income per common share:   
Basic$1.47
 $0.31
Diluted$1.45
 $0.30
Weighted average number of shares outstanding:   
Basic276,856
 278,663
Diluted280,802
 284,224



See accompanying notes.

3
Table of Contents
HOLOGIC, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(In millions)
 Three Months Ended
 December 30,
2017		 December 31,
2016
Net income$406.7
 $86.5
Changes in foreign currency translation adjustment5.5
 (15.7)
Changes in unrealized holding gains and losses on available-for-sale securities, net of tax of $0.2 and $1.5 for the three months December 30, 2017 and December 31, 2016:   
Gain recognized in other comprehensive income (loss)—
 2.3
Loss reclassified from accumulated other comprehensive loss to the statements of income0.4
 0.1
Changes in pension plans, net of taxes of $0.6 for the three months ended December 30, 20170.6
 —
Changes in value of hedged interest rate caps, net of tax of $(4.9) and $0.5 for the three months ended December 30, 2017 and December 31, 2016:   
(Loss) gain recognized in other comprehensive income (loss), net(4.3) 0.7
Loss reclassified from accumulated other comprehensive loss to the statements of income2.3
 2.1
Other comprehensive income (loss)4.5
 (10.5)
Comprehensive income$411.2
 $76.0
 Three Months EndedNine Months Ended
 June 27,
2020		June 29,
2019		June 27,
2020		June 29,
2019
Net income (loss)$136.4  $93.9  $616.9  $(80.1) 
Changes in foreign currency translation adjustment1.4  (2.4) 4.3  (3.2) 
Changes in value of hedged interest rate swaps and interest rate caps, net of tax of $(1.5) and $(7.9) for the three and nine months ended June 27, 2020 and $0.4 and $1.2 for the three and nine months ended June 29, 2019.
Loss recognized in other comprehensive income, net(4.7) (2.1) (25.9) (7.5) 
Loss reclassified from accumulated other comprehensive loss to the statements of operations0.3  0.8  2.0  2.0  
Other comprehensive loss(3.0) (3.7) (19.6) (8.7) 
Comprehensive income (loss)$133.4  $90.2  $597.3  $(88.8) 
Components of comprehensive income (loss) attributable to noncontrolling interest:
Net loss attributable to noncontrolling interest1.5  —  3.4  —  
Comprehensive loss attributable to noncontrolling interest1.5  —  3.4  —  
Comprehensive income (loss) attributable to Hologic$134.9  $90.2  $600.7  $(88.8) 
See accompanying notes.





4
Table of Contents
HOLOGIC, INC.


CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions, except number of shares, which are reflected in thousands, and par value)
 
December 30,
2017		 September 30,
2017		June 27,
2020		September 28,
2019
ASSETS   ASSETS
Current assets:   Current assets:
Cash and cash equivalents$664.4
 $540.6
Cash and cash equivalents$744.2  $601.8  
Accounts receivable, less reserves of $11.5 and $9.8, respectively548.0
 533.5
Accounts receivable, less reserves of $27.2 and $17.8, respectivelyAccounts receivable, less reserves of $27.2 and $17.8, respectively728.0  648.7  
Inventories358.2
 331.6
Inventories413.6  444.9  
Prepaid income taxes14.3
 22.4
Prepaid income taxes45.5  34.9  
Prepaid expenses and other current assets53.5
 50.5
Prepaid expenses and other current assets51.5  62.8  
Total current assets1,638.4
 1,478.6
Total current assets1,982.8  1,793.1  
Property, plant and equipment, net467.1
 472.8
Property, plant and equipment, net456.2  470.9  
Intangible assets, net2,681.3
 2,772.3
Intangible assets, net1,252.5  1,459.8  
Goodwill3,176.7
 3,171.2
Goodwill2,592.9  2,563.7  
Other assets84.8
 84.7
Other assets518.7  154.6  
Total assets$8,048.3
 $7,979.6
Total assets$6,803.1  $6,442.1  
LIABILITIES AND STOCKHOLDERS’ EQUITY   LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:   Current liabilities:
Current portion of long-term debt$572.1
 $1,150.8
Current portion of long-term debt$565.5  $271.4  
Accounts payable160.3
 166.6
Accounts payable127.3  186.5  
Accrued expenses412.7
 375.3
Accrued expenses476.0  430.9  
Deferred revenue163.2
 171.2
Deferred revenue175.1  179.5  
Current portion of capital lease obligations1.6
 1.6
Finance lease obligation (capital lease obligation in 2019)Finance lease obligation (capital lease obligation in 2019)1.8  1.8  
Total current liabilities1,309.9
 1,865.5
Total current liabilities1,345.7  1,070.1  
Long-term debt, net of current portion2,757.7
 2,172.1
Long-term debt, net of current portion2,731.3  2,783.6  
Capital lease obligations, net of current portion22.3
 22.7
Finance lease obligation - long term (capital lease obligation in 2019)Finance lease obligation - long term (capital lease obligation in 2019)17.9  19.2  
Deferred income tax liabilities586.4
 973.6
Deferred income tax liabilities214.1  275.3  
Deferred revenue18.8
 20.8
Deferred revenue12.6  15.8  
Other long-term liabilities159.2
 140.2
Other long-term liabilities222.9  162.4  
Commitments and contingencies (Note 7)
 
Stockholders’ equity:   Stockholders’ equity:
Preferred stock, $0.01 par value – 1,623 shares authorized; 0 shares issued—
 —
Preferred stock, $0.01 par value – 1,623 shares authorized; 0 shares issued—  —  
Common stock, $0.01 par value – 750,000 shares authorized; 288,750 and 287,853 shares issued, respectively2.9
 2.9
Common stock, $0.01 par value –750,000 shares authorized; 294,684 and 292,323 shares issued, respectivelyCommon stock, $0.01 par value –750,000 shares authorized; 294,684 and 292,323 shares issued, respectively2.9  2.9  
Additional paid-in-capital5,628.9
 5,630.8
Additional paid-in-capital5,861.7  5,769.8  
Accumulated deficit(1,976.0) (2,382.7)Accumulated deficit(2,068.1) (2,688.7) 
Treasury stock, at cost – 12,560 shares(450.1) (450.1)
Treasury stock, at cost – 35,941 and 24,638 shares, respectivelyTreasury stock, at cost – 35,941 and 24,638 shares, respectively(1,479.5) (926.0) 
Accumulated other comprehensive loss(11.7) (16.2)Accumulated other comprehensive loss(61.9) (42.3) 
Total Hologic's stockholders’ equityTotal Hologic's stockholders’ equity2,255.1  2,115.7  
Noncontrolling interestNoncontrolling interest3.5  —  
Total stockholders’ equity3,194.0
 2,784.7
Total stockholders’ equity2,258.6  2,115.7  
Total liabilities and stockholders’ equity$8,048.3
 $7,979.6
Total liabilities and stockholders’ equity$6,803.1  $6,442.1  
See accompanying notes.

5

Table of Contents
Hologic, Inc.
Consolidated Statements of Stockholders' Equity
(In millions, except number of shares, which are reflected in thousands)
 Common StockAdditional
Paid-in-
Capital		Accumulated
Deficit		Accumulated
Other
Comprehensive
Loss		Treasury StockTotal
Stockholders’
Equity
 Number of
Shares		Par ValueNumber of
Shares		AmountNoncontrolling Interest
Balance at September 29, 2018289,900  $2.9  $5,671.3  $(2,494.0) $(25.5) 19,812  $(725.9) $—  $2,428.8  
Accounting standard transition adjustment - ASC 606—  —  —  6.4  —  —  —  —  6.4  
Accounting standard transition adjustment - ASU 2016-16—  —  —  2.5  —  —  —  —  2.5  
Exercise of stock options373  —  9.1  —  —  —  —  —  9.1  
Vesting of restricted stock units, net of shares withheld for employee taxes575  —  (11.6) —  —  —  —  —  (11.6) 
Stock-based compensation—  —  17.1  —  —  —  —  —  17.1  
Net income—  —  —  98.6  —  —  —  —  98.6  
Other comprehensive income activity—  —  —  —  (6.4) —  —  —  (6.4) 
Repurchase of common stock—  —  —  —  —  3,712  (150.1) —  (150.1) 
Balance at December 29, 2018290,848  $2.9  $5,685.9  $(2,386.5) $(31.9) 23,524  $(876.0) $—  $2,394.4  
Exercise of stock options454  —  11.6  —  —  —  —  —  11.6  
Vesting of restricted stock units, net of shares withheld for employee taxes33  —  (0.4) —  —  —  —  —  (0.4) 
Common stock issued under the employee stock purchase plan226  —  7.9  —  —  —  —  —  7.9  
Stock-based compensation—  —  17.5  —  —  —  —  —  17.5  
Net loss—  —  —  (272.6) —  —  —  —  (272.6) 
Other comprehensive income activity—  —  —  —  1.4  —  —  —  1.4  
Balance at March 30, 2019291,561  $2.9  $5,722.5  $(2,659.1) $(30.5) 23,524  $(876.0) $—  $2,159.8  
Exercise of stock options108  —  3.1  —  —  —  —  —  3.1  
Vesting of restricted stock units, net of shares withheld for employee taxes21  —  (0.5) —  —  —  —  —  (0.5) 
Stock-based compensation—  —  13.9  —  —  —  —  —  13.9  
Net income—  —  —  93.9  —  —  —  —  93.9  
Other comprehensive income activity—  —  —  —  (3.7) —  —  —  (3.7) 
6
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Repurchase of common stock—  —  —  —  —  1,114  (50.0) —  (50.0) 
Balance at June 29, 2019291,690  $2.9  $5,739.0  $(2,565.2) $(34.2) 24,638  $(926.0) $—  $2,216.5  
Exercise of stock options369  —  9.0  —  —  —  —  —  9.0  
Vesting of restricted stock units, net of shares withheld for employee taxes16  —  (0.3) —  —  —  —  —  (0.3) 
Common stock issued under the employee stock purchase plan248  —  8.6  —  —  —  —  —  8.6  
Stock-based compensation—  —  13.5  —  —  —  —  —  13.5  
Net loss—  —  —  (123.5) —  —  —  —  (123.5) 
Other comprehensive income activity—  —  —  —  (8.1) —  —  —  (8.1) 
Balance at September 28, 2019292,323  $2.9  $5,769.8  $(2,688.7) $(42.3) 24,638  $(926.0) $—  $2,115.7  
Noncontrolling interest created in acquisition—  —  —  —  —  —  —  8.6  8.6  
Accounting standard transition adjustment - ASC 842—  —  —  0.3  —  —  —  —  0.3  
Exercise of stock options540  —  13.8  —  —  —  —  —  13.8  
Vesting of restricted stock units, net of shares withheld for employee taxes476  —  (10.9) —  —  —  —  —  (10.9) 
Stock-based compensation—  —  18.1  —  —  —  —  —  18.1  
Net income (loss)—  —  —  386.1  —  —  —  (0.3) 385.8  
Other comprehensive income activity—  —  —  —  13.6  —  —  —  13.6  
Repurchase of common stock—  —  —  —  —  1,545  (80.9) —  (80.9) 
Accelerated share repurchase agreement—  —  (41.0) —  —  3,279  (164.0) —  (205.0) 
Purchase of non-controlling interest—  —  —  —  —  —  —  (1.4) (1.4) 
Balance at December 28, 2019293,339  $2.9  $5,749.8  $(2,302.3) $(28.7) 29,462  $(1,170.9) $6.9  $2,257.7  
Exercise of stock options503  —  13.9  —  —  —  —  —  13.9  
Vesting of restricted stock units, net of shares withheld for employee taxes86  —  (1.6) —  —  —  —  —  (1.6) 
Common stock issued under the employee stock purchase plan214  —  8.8  —  —  —  —  —  8.8  
Stock-based compensation—  —  15.7  —  —  —  —  —  15.7  
Net income (loss)—  —  —  96.3  —  —  —  (1.5) 94.8  
Other comprehensive income activity—  —  —  —  (30.2) —  —  —  (30.2) 
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Repurchase of common stock—  —  —  —  —  5,851  (267.6) —  (267.6) 
Completion of Accelerated share repurchase agreement—  —  41.0  —  —  628  (41.0) —  —  
Purchase of non-controlling interest—  —  —  —  —  —  —  (0.3) (0.3) 
Balance at March 28, 2020294,142  $2.9  $5,827.6  $(2,206.0) $(58.9) 35,941  $(1,479.5) $5.1  $2,091.2  
Exercise of stock options533  —  14.4  —  —  —  —  —  14.4  
Vesting of restricted stock units, net of shares withheld for employee taxes9  —  (0.2) —  —  —  —  —  (0.2) 
Stock-based compensation—  —  19.9  —  —  —  —  —  19.9  
Net income (loss)—  —  —  137.9  —  —  —  (1.5) 136.4  
Other comprehensive income activity—  —  —  —  (3.0) —  —  —  (3.0) 
Purchase of non-controlling interest—  —  —  —  —  —  —  (0.1) (0.1) 
Balance at June 27, 2020294,684  $2.9  $5,861.7  $(2,068.1) $(61.9) 35,941  $(1,479.5) $3.5  $2,258.6  


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Table of Contents
HOLOGIC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
Nine Months Ended
June 27,
2020		June 29,
2019
OPERATING ACTIVITIESOPERATING ACTIVITIES
Net income (loss)Net income (loss)$616.9  $(80.1) 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:Adjustments to reconcile net income (loss) to net cash provided by operating activities:
DepreciationDepreciation62.8  69.7  
Amortization of acquired intangiblesAmortization of acquired intangibles218.9  280.0  
Stock-based compensation expenseStock-based compensation expense53.7  48.5  
Deferred income taxesDeferred income taxes(63.3) (194.8) 
Intangible asset and equipment impairment chargesIntangible asset and equipment impairment charges30.2  443.8  
Three Months Ended
December 30,
2017		 December 31,
2016
OPERATING ACTIVITIES   
Net income$406.7
 $86.5
Adjustments to reconcile net income to net cash (used in) provided by operating activities:   
Depreciation27.0
 20.4
Amortization of acquired intangibles94.2
 94.9
Non-cash interest expense8.7
 14.3
Stock-based compensation expense16.4
 19.2
Deferred income taxes(390.7) (24.6)
Debt extinguishment loss1.0
 —
Other adjustments and non-cash items1.2
 (6.0)Other adjustments and non-cash items23.6  24.3  
Changes in operating assets and liabilities, excluding the effect of acquisitions:   
Changes in operating assets and liabilities, excluding the effect of acquisitions and dispositions:Changes in operating assets and liabilities, excluding the effect of acquisitions and dispositions:
Accounts receivable(6.4) 21.5
Accounts receivable(130.5) (9.7) 
Inventories(23.3) (20.7)Inventories(48.0) (81.7) 
Prepaid income taxes8.1
 (0.8)Prepaid income taxes(10.6) (11.5) 
Prepaid expenses and other assets(5.0) (17.4)Prepaid expenses and other assets(290.0) (11.8) 
Accounts payable(7.1) (17.8)Accounts payable(55.1) (30.9) 
Accrued expenses and other liabilities48.9
 14.6
Accrued expenses and other liabilities40.5  (47.9) 
Deferred revenue(10.6) (14.5)Deferred revenue5.5  3.9  
Net cash provided by operating activities169.1
 169.6
Net cash provided by operating activities454.6  401.8  
INVESTING ACTIVITIES   INVESTING ACTIVITIES
Acquisition of businesses, net of cash acquired(4.1) —
Acquisition of businesses, net of cash acquired(43.2) (109.4) 
Net proceeds from sale of businessNet proceeds from sale of business142.7  —  
Capital expenditures(10.2) (11.5)Capital expenditures(53.2) (37.8) 
Increase in equipment under customer usage agreements(11.6) (13.2)Increase in equipment under customer usage agreements(44.9) (39.9) 
Proceeds from sale of available-for-sale marketable securities0.1
 0.4
Purchase of cost-method investmentPurchase of cost-method investment—  (3.0) 
Purchase of insurance contractsPurchase of insurance contracts(2.4) —  
Purchase of intellectual propertyPurchase of intellectual property—  (4.5) 
Other activity(0.4) (0.9)Other activity(2.7) (5.3) 
Net cash used in investing activities(26.2) (25.2)Net cash used in investing activities(3.7) (199.9) 
FINANCING ACTIVITIES   FINANCING ACTIVITIES
Proceeds from long-term debtProceeds from long-term debt—  1,500.0  
Repayment of long-term debt(1,331.3) (18.8)Repayment of long-term debt(28.1) (1,462.5) 
Proceeds from long-term debt1,500.0
 —
Repayment of amounts borrowed under accounts receivable securitization program—
 (12.0)
Proceeds from senior notes350.0
 —
Payments to extinguish convertible notes(296.9) (6.4)
Proceeds from amounts borrowed under revolving credit line495.0
 —
Repayments of amounts borrowed under revolving credit line(720.0) —
Proceeds from revolving credit lineProceeds from revolving credit line750.0  480.0  
Repayments under revolving credit lineRepayments under revolving credit line(250.0) (780.0) 
Proceeds from accounts receivable securitization agreementProceeds from accounts receivable securitization agreement16.0  43.0  
Repayments under accounts receivable securitization agreementRepayments under accounts receivable securitization agreement(250.0) (34.0) 
Purchase of non-controlling interestPurchase of non-controlling interest(1.8) —  
Payment of deferred acquisition considerationPayment of deferred acquisition consideration(24.3) (2.6) 
Payment of acquired long-term debtPayment of acquired long-term debt(8.3) (2.5) 
Payment of debt issuance costs(11.9) —
Payment of debt issuance costs—  (2.7) 
Payments to repurchase common stock pursuant to ASR agreementPayments to repurchase common stock pursuant to ASR agreement(205.0) —  
Repurchase of common stockRepurchase of common stock(348.4) (200.1) 
Purchase of interest rate capsPurchase of interest rate caps—  (1.5) 
Proceeds from issuance of common stock pursuant to employee stock plans9.5
 13.2
Proceeds from issuance of common stock pursuant to employee stock plans54.7  35.9  
Payments under capital lease obligations(0.4) —
Payment of minimum tax withholdings on net share settlements of equity awards(14.3) (16.4)Payment of minimum tax withholdings on net share settlements of equity awards(12.6) (12.4) 
Payments under finance lease obligationsPayments under finance lease obligations(1.2) (1.3) 
Net cash used in financing activities(20.3) (40.4)Net cash used in financing activities(309.0) (440.7) 
Effect of exchange rate changes on cash and cash equivalents1.2
 (6.4)Effect of exchange rate changes on cash and cash equivalents0.5  —  
Net increase in cash and cash equivalents123.8
 97.6
Net increase (decrease) in cash and cash equivalentsNet increase (decrease) in cash and cash equivalents142.4  (238.8) 
Cash and cash equivalents, beginning of period540.6
 548.4
Cash and cash equivalents, beginning of period601.8  666.7  
Cash and cash equivalents, end of period$664.4
 $646.0
Cash and cash equivalents, end of period$744.2  $427.9  
See accompanying notes.

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HOLOGIC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(all tabular amounts in millions, except number of shares, which are reflected in thousands, and per share data)
(1) Basis of Presentation
The consolidated financial statements of Hologic, Inc. (“Hologic” or the “Company”) presented herein have been prepared pursuant to the rules of the Securities and Exchange Commission (“SEC”(the “SEC”) for quarterly reports on Form 10-Q and do not include all of the information and disclosures required by U.S. generally accepted accounting principles (“GAAP”). for annual financial statements. These financial statements should be read in conjunction with the consolidated financial statements and related notes for the fiscal year ended September 30, 201728, 2019 included in the Company’s Form 10-K filed with the SEC on November 21, 2017.27, 2019. In the opinion of management, the financial statements and notes contain all adjustments (consisting of normal recurring accruals)accruals and all other necessary adjustments) considered necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the periods presented.
The consolidated financial statements include the accounts of the Company and its wholly ownedwholly-owned and majority-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
The preparation of financial statements in conformity with U.S. GAAP requires management to make significant estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from management’s estimates if past experience or other assumptions do not turn out to be substantially accurate. Operating results for the three and nine months ended December 30, 2017June 27, 2020 are not necessarily indicative of the results to be expected for any other interim period or the entire fiscal year ending September 29, 2018.26, 2020.
On March 22, 2017,COVID-19 Considerations
The pandemic caused by the spread of the novel strain of coronavirus disease 2019 ("COVID-19") has created significant volatility, uncertainty and economic disruption in the markets the Company completedsells its products into, primarily the acquisitionU.S., Europe and Asia-Pacific. In the second and third quarters of Cynosure, Inc. ("Cynosure"), which resultedfiscal 2020, the spread of COVID-19 has negatively impacted business and healthcare activity globally. As healthcare systems respond to the increasing demands of managing COVID-19 and the resulting economic uncertainties, governments around the world have imposed measures designed to reduce the transmission of COVID-19, and individuals are responding to the fears of contracting COVID-19. In particular, elective procedures and exams have been and continue to be delayed or cancelled, there has been a significant reduction in physician office visits, and hospitals have postponed or cancelled capital purchases as well as limited or eliminated services, however in the second half of the third quarter of fiscal 2020, the Company expanding intostarted to see a recovery of elective procedures and exams. These responses have had, and the medical aesthetics market. Cynosure develops, manufacturesCompany believes will continue to have, a negative impact on the Company's operating results and markets aesthetic treatment systems that enable medical practitionerscash flows. However, the impact of the Company's commercial release of its COVID assays more than offset these impacts, as the Company generated significant revenue from the sales of these assays in the third quarter of fiscal 2020.The negative effects of COVID-19 and the associated economic disruptions were felt primarily beginning in the second half of March in many of the Company's end-markets and earlier in Asia, primarily China, and the effect to perform non-invasivethe Company's legacy products in the third fiscal quarter was significant. The Company believes the impact on its businesses may begin to lessen in the fourth quarter and minimally invasive procedures. Cynosure'scontinue to do so in subsequent periods, however, the impacts on these periods could continue to be significant.
While the Company's results of operations are reported withinand cash flows in the third quarter of fiscal 2020 were positively impacted by the sale of its COVID assays, the COVID-19 pandemic could have an adverse impact on its operating results, cash flows and financial condition in the future. The factors that could create such adverse impact include: the severity and duration of the COVID-19 pandemic; continued demand for COVID-19 testing; competition from existing and new COVID-19 testing technologies and products; the COVID-19 pandemic’s impact on the U.S. and international healthcare system, the U.S. economy and worldwide economy; and the timing, scope and effectiveness of U.S. and international governmental responses to the COVID-19 pandemic and associated economic disruptions.
In addition to adversely affecting demand for the Company's Medical Aesthetics reportable segment. products, other than its COVID assays, COVID-19 and associated economic disruptions could continue to have an adverse impact on the Company's supply chains and distribution systems, including as a result of impacts associated with preventive and precautionary measures that it, other businesses and governments have taken and will take. A reduction or interruption in any of the Company's manufacturing processes could have a material adverse effect on its business.
The Company expects that the uncertainty surrounding world financial markets and deteriorating worldwide macroeconomic conditions resulting from the pandemic have caused and may continue to cause the purchasers of medical
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equipment to decrease their medical equipment purchasing and procurement activities. Additionally, the pandemic has caused and may further cause constrictions in world credit markets that have and could cause its customers to experience increased difficulty in paying their existing obligations to the Company or in securing the financing necessary to purchase the Company's acquisitionproducts. Economic uncertainty has and may continue to result in cost-conscious consumers focusing on acute care rather than wellness, which would also continue to adversely affect demand for the Company's products.
As the Company assessed the potential longer term economic and capital market uncertainties resulting from the COVID-19 pandemic, at the end of Cynosure isMarch 2020 the Company suspended its accounts receivable securitization program and borrowed $750.0 million under its revolver. The Company used $250.0 million of these proceeds to pay off all amounts then owed under its accounts receivable securitization agreement and retained the balance as cash reserve. As of the end of the third quarter of fiscal 2020, the Company repaid $250.0 million of the $750.0 million borrowed under its revolver. As of June 27, 2020 the Company had an additional $1 billion available under its revolver and $744.2 million of cash on hand.
In response to the negative impact of COVID-19 on the Company's business, in April 2020 the Company initiated cost-cutting measures, which included not only reducing discretionary and variable spend, such as travel, marketing programs and the use of contractors, consultants and temporary help, but the Company also implemented employee furloughs, salary cuts primarily in the U.S., reduced hours and in certain instances employee terminations. As of the end of the third quarter of fiscal 2020, substantially all of the Company's employee cost-cutting measures ceased. Further, the Company shut down certain manufacturing facilities temporarily and implemented reduced work-week schedules in response to lower near-term demand for many of its products.
The Company has also taken measures to ensure the safety of its employees and to comply with governmental orders. These measures could require that the Company's employees continue to work remotely or otherwise refrain from reporting to their normal workplace for extended periods of time, which in turn could result in a decrease in its commercial and marketing activities.
During the second quarter of fiscal 2020, the FDA granted Emergency Use Authorization (EUA) for the Company's Panther Fusion SARS-CoV-2 assay for testing for the COVID-19 virus. During the third quarter of fiscal 2020, the FDA granted Emergency Use Authorization for the Company's Aptima SARS-CoV-2 assay which runs on the Company's more fully described in Note 3.widely distributed Panther instrument.
Recently Adopted Accounting Pronouncements
In DecemberFebruary 2016, the FASBFinancial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2016-19, Technical Corrections2016-02, Leases (Topic 842), referred to as ASC 842. The purpose of ASU 2016-02 is to increase the transparency and Improvements (ASU 2016-19). This guidance changes how companies classify internal-use software from classification within property, plant,comparability among organizations by recognizing lease assets and equipment to intangible assets. The amendments inliabilities on the update arebalance sheet, including those previously classified as operating leases under GAAP, and disclosing key information about leasing arrangements. ASC 842, as amended, is effective for public entities for annual periods beginning after December 15, 2016,2018, including interim periods within those annual periods and were applicable towas effective for the Company in fiscal 2018.2020. The Company adopted the standard using the transition method provided by ASC Update No. 2018-11, Leases (Topic 842): Targeted Improvements. Under this method, the Company applied the new lease standard on September 29, 2019, rather than at the earliest comparative period presented in the financial statements. Prior periods were presented in accordance with the existing lease guidance under ASC Topic 840, Leases (ASC 840).
        Upon transition, the Company applied the package of practical expedients permitted under ASC 842 transition guidance to its entire lease portfolio at September 29, 2019. As a result, the Company was not required to reassess (i) whether any expired or existing contracts are or contain leases, (ii) the classification of any expired or existing leases, and (iii) initial direct costs for any existing leases. Furthermore, as a lessee the Company elected to combine lease and non-lease components together for the majority of its leases. As a result, for these applicable classes of underlying assets, the Company accounted for each separate lease component and the non-lease components associated with that lease component as a single lease component.
        Under ASC 842 as a lessor, in instances where the Company places instruments (or equipment) at customer sites as part of its reagent rental contracts, certain of the Company's reagent rental contracts could be classified as sales-type leases. Under sales-type leases, there is accelerated expense recognition for the cost of the placed equipment and potentially up-front revenue in the event there are fixed rental payments, a portion of which would be allocated to the equipment. The Company does not expect to have a significant amount of sales-type leases. Under ASC 840, all instruments placed under the Company's reagent rental programs were classified as operating leases and instrument revenue and cost were recognized over the term of the contract.
        Upon adoption of the new lease standard, the Company recognized operating lease right-of-use assets and finance lease right-of-use assets of $91.7 million and $10.2 million, respectively, and corresponding operating lease liabilities and finance lease liabilities of $96.6 million and $21.0 million, respectively. This includes recording the Company’s existing capital lease as
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a finance lease at transition. In addition, the Company derecognized $32.6 million of property, plant and equipment and $35.2 million of finance lease obligations recorded in accrued expenses and other long-term liabilities associated with two previously existing build-to-suit lease arrangements. Right-of-use assets and corresponding liabilities for these build-to-suit lease arrangements are included within the total amount recognized upon adoption of the new lease standard. The Company’s adoption of ASC 842 is more fully described in Note 3.
In August 2017, the FASB issued ASU 2016-19No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The guidance requires certain changes to the presentation of hedge accounting in the financial statements and also simplifies the application of hedge accounting and expands the strategies that qualify for hedge accounting. The Company adopted the standard in the first quarter of fiscal 2018. As2020. The adoption of ASU 2017-12 did not have a result ofmaterial effect on the adoption, the Company has reclassified $17.6 million and $18.4 million of internal-use software from property, plant, and equipment to intangible assets as of December 30, 2017 and September 30, 2017, respectively. Additionally, the Company reclassified $12.9 million and $12.3 million of capitalized software embedded in its products from other assets to intangible assets as of December 30, 2017 and September 30, 2017, respectively.Company's consolidated financial statements.
Subsequent Events Consideration
The Company considers events or transactions that occur after the balance sheet date but prior to the issuance of the financial statements to provide additional evidence for certain estimates or to identify matters that may require additional disclosure. Subsequent events have been evaluated as required. There were no material recognized or unrecognized subsequent events recorded inaffecting the unaudited consolidated financial statements as of and for the three and nine months ended June 27, 2020.
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(2) Revenue

        The Company accounts for revenue pursuant to ASC Update No. 2014-09, Revenue from Contracts with Customer (ASC 606) and generates revenue from the sale of its products, primarily medical imaging systems and related components and software, diagnostic tests and assays, surgical and interventional breast disposable products and until December 30, 2017. On January 19, 2018,28, 2019 medical aesthetic treatment systems, and related services, which are primarily support and maintenance services on its medical imaging systems, and to a lesser extent installation, training and repairs. The Company's products are sold primarily through a direct sales force, and within international markets, there is more reliance on distributors and resellers. Revenue is recorded net of sales tax. The following tables provide revenue from contracts with customers by business and geographic region on a disaggregated basis:
Three Months Ended June 27, 2020Three Months Ended June 29, 2019
Business (in millions)
United StatesInternationalTotalUnited StatesInternationalTotal
Diagnostics:
Cytology & Perinatal$40.3  $23.8  $64.1  $78.5  $41.8  $120.3  
Molecular Diagnostics391.0  69.3  460.3  138.5  32.4  170.9  
Blood Screening7.8  —  7.8  14.2  —  14.2  
Total$439.1  $93.1  $532.2  $231.2  $74.2  $305.4  
Breast Health:
Breast Imaging$145.6  $47.6  $193.2  $214.6  $55.4  $270.0  
Interventional Breast Solutions25.0  5.8  30.8  46.9  8.5  55.4  
Total$170.6  $53.4  $224.0  $261.5  $63.9  $325.4  
GYN Surgical$42.1  $9.4  $51.5  $92.8  $19.4  $112.2  
Medical Aesthetics$—  $—  $—  $41.6  $43.4  $85.0  
Skeletal Health$9.0  $6.2  $15.2  $15.4  $9.0  $24.4  
$660.8  $162.1  $822.9  $642.5  $209.9  $852.4  
Nine Months Ended June 27, 2020Nine Months Ended June 29, 2019
Business (in millions)
United StatesInternationalTotalUnited StatesInternationalTotal
Diagnostics:
Cytology & Perinatal$191.1  $107.6  $298.7  $234.3  $119.6  $353.9  
Molecular Diagnostics683.0  146.5  829.5  409.4  93.5  502.9  
Blood Screening35.0  —  35.0  41.8  —  41.8  
Total$909.1  $254.1  $1,163.2  $685.5  $213.1  $898.6  
Breast Health:
Breast Imaging$541.1  $177.1  $718.2  $627.3  $178.3  $805.6  
Interventional Breast Solutions120.4  24.2  144.6  139.8  26.2  166.0  
Total$661.5  $201.3  $862.8  $767.1  $204.5  $971.6  
GYN Surgical$227.6  $48.3  $275.9  $268.0  $54.8  $322.8  
Medical Aesthetics$30.9  $34.4  $65.3  $116.5  $122.1  $238.6  
Skeletal Health$39.4  $22.9  $62.3  $42.6  $27.2  $69.8  
$1,868.5  $561.0  $2,429.5  $1,879.7  $621.7  $2,501.4  
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Three Months EndedNine Months Ended
Geographic Regions (in millions)
June 27, 2020June 29, 2019June 27, 2020June 29, 2019
United States$660.8  $642.5  $1,868.5  $1,879.7  
Europe101.7  95.9  322.9  299.2  
Asia-Pacific43.7  76.2  155.5  210.1  
Rest of World16.7  37.8  82.6  112.4  
$822.9  $852.4  $2,429.5  $2,501.4  

The following table provides revenue recognized by source:
Three Months EndedNine Months Ended
Revenue by type (in millions)
June 27, 2020June 29, 2019June 27, 2020June 29, 2019
Capital equipment, components and software$113.5  $248.9  $513.1  $736.6  
Consumables588.1  455.1  1,511.4  1,318.2  
Service116.4  141.6  388.6  424.6  
Other4.9  6.8  16.4  22.0  
$822.9  $852.4  $2,429.5  $2,501.4  

        The Company considers revenue to be earned when all of the following criteria are met: the Company completedhas a private placementcontract with a customer that creates enforceable rights and obligations; promised products or services are identified; the transaction price, or the amount the Company expects to receive, including an estimate of $1.0 billion aggregate principaluncertain amounts subject to a constraint to ensure revenue is not recognized in an amount that would result in a significant reversal upon resolution of the uncertainty, is determinable; and the Company has transferred control of the promised items to the customer. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in the contract. The transaction price for the contract is measured as the amount of senior notes,consideration the Company expects to receive in exchange for the goods and services expected to be transferred. A contract's transaction price is allocated between (i) $600to each distinct performance obligation and recognized as revenue when, or as, control of the distinct good or service is transferred. Transfer of control for the Company's products is generally at shipment or delivery, depending on contractual terms, but occurs when title and risk of loss transfers to the customer which represents the point in time when the customer obtains the use of and substantially all of the remaining benefit of the product. As such, the Company's performance obligation related to product sales is satisfied at a point in time. Revenue from support and maintenance contracts, extended warranty and professional services for installation, training and repairs is recognized over time based on the period contracted or as the services are performed as these methods represent a faithful depiction of the transfer of goods and services.

        The Company recognizes a receivable when it has an unconditional right to payment. Payment terms are typically 30 days in the U.S. but may be longer in international markets. The Company treats shipping and handling costs performed after a customer obtains control of the good as a fulfillment cost and records these costs within costs of product revenue when the corresponding revenue is recognized.

        The Company also places instruments (or equipment) at customer sites but retains title to the instrument. The customer has the right to use the instrument for a period of time, and the Company recovers the cost of providing the instrument through the sales of disposables, namely tests and assays in Diagnostics and handpieces in GYN Surgical. These types of agreements include an embedded lease, which is generally an operating lease, for the right to use an instrument and no instrument revenue is recognized at the time of instrument delivery. The Company recognizes a portion of the revenue allocated to the embedded lease concurrent with the sale of disposables over the term of the agreement.

        Some of the Company's contracts have multiple performance obligations. For contracts with multiple performance obligations, the Company allocates the transaction price to each performance obligation using its best estimate of the standalone selling price of each distinct good or service in the contract. The Company determines its best estimate of stand-alone selling price using average selling prices over 3 to 12 month periods of data depending on the products or nature of the services coupled with current market considerations. If the product or service does not have a history of sales or if sales volume is not sufficient, the Company relies on prices set by its pricing committees or applicable marketing department adjusted for expected discounts.

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Variable Consideration

        The Company exercises judgment in estimating variable consideration, which includes volume discounts, sales rebates, product returns and other adjustments. These amounts are recorded as a reduction to revenue and classified as a current liability. The Company bases its estimates for volume discounts and sales rebates on historical information to the extent it is reasonable to be used as a predictive tool of expected future rebates. To the extent the transaction price includes variable consideration, the Company applies judgment in constraining the estimated variable consideration due to factors that may cause reversal of revenue recognized. The Company evaluates constraints based on its historical and projected experience with similar customer contracts.
        The Company's contracts typically do not provide the right to return product. In general, estimates of variable consideration and constraints are not material to the Company's financial statements.

Remaining Performance Obligations

        As of June 27, 2020, the estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied was approximately $588.3 million. This remaining performance obligation primarily relates to extended warranty and support and maintenance obligations in the Company's Breast Health and Skeletal Health reportable segments. The Company expects to recognize approximately 12% of this amount as revenue in 2020, 36% in 2021, 26% in 2022, 16% in 2023, and 10% thereafter. The Company has applied the practical expedient to not include remaining performance obligations related to contracts with original expected durations of one year or less in the amounts above.

Contract Assets and Liabilities

        The Company discloses accounts receivable separately in the Consolidated Balance Sheets at their net realizable value. Contract assets primarily relate to the Company's conditional right to consideration for work completed but not billed at the reporting date. Contract assets at the beginning and end of the period, as well as the changes in the balance, were immaterial.

        Contract liabilities primarily relate to payments received from customers in advance of performance under the contract. The Company records a contract liability, or deferred revenue, when it has an obligation to provide service, and to a much lesser extent product, to the customer and payment is received or due in advance of performance. Deferred revenue primarily relates to support and maintenance contracts and extended warranty obligations within the Company's Breast Health and Skeletal Health reportable segments and until recently the divested Medical Aesthetics segment. Contract liabilities are classified as other current liabilities and other long-term liabilities on the Consolidated Balance Sheets. The Company recognized revenue of $18.0 million and $95.5 million in the three and nine months ended June 27, 2020 that was included in the contract liability balance at September 28, 2019.

(3) Leases
Lessee Activity - Leases where Hologic is the Lessee

        The majority of its 4.375% Senior Notes due 2025 (the “New 2025 Senior Notes”)the Company's facilities are occupied under operating lease arrangements with various expiration dates through 2035, some of which include options to extend the term of the lease, and some of which include options to terminate the lease within one year. The Company has operating leases for office space, land, warehouse and manufacturing space, vehicles and certain equipment. Leases with an initial term of 12 months or less are generally not recorded on the balance sheet and expense for these leases is recognized on a straight-line basis over the lease term. For leases executed in fiscal 2020 and later, the Company accounts for the lease components and the non-lease components as a single lease component. The Company's leases have remaining lease terms of one year to approximately 15 years, some of which may include options to extend the leases for up to 20 years and some include options to terminate early. These options have been included in the determination of the lease liability when it is reasonably certain that the option will be exercised. The Company does not have any leases that include residual value guarantees.

        The Company determines whether an arrangement is or contains a lease based on the unique facts and circumstances present at the inception of an arrangement. The right-of-use assets and related liabilities for operating leases are included in other assets, accrued expenses, and other long-term liabilities in the consolidated balance sheet as of June 27, 2020. The Company's lease classified as a capital lease in fiscal 2019 is now classified as a finance lease on the balance sheet as of June 27, 2020.
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        Right-of-use assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease contract. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of fixed lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilizes the incremental borrowing rate, which is the estimated rate that would be incurred to borrow on a collateralized basis over a similar term at an offering priceamount equal to the lease payments in a similar economic environment. The weighted average discount rate utilized on the Company's operating and finance lease liabilities as of 100%June 27, 2020 was 2.6%.

        The following table presents supplemental balance sheet information related to the Company's operating and finance leases:
June 27, 2020
Balance Sheet LocationOperating LeasesFinance Lease
Assets
Lease right-of-use assetsOther assets$83.0 $— 
Liabilities
Operating lease liabilities (current)Accrued expenses$22.9 $— 
Finance lease liabilities (current)Finance lease obligations - short term$— $1.8 
Operating lease liabilities (non-current)
Other long-term liabilities

$68.3 $— 
Finance lease liabilities (non-current)Finance lease obligations - long term
$— $17.9 

        The finance lease was previously recorded as a capital lease in the consolidated balance at September 28, 2019, and the short-term and long-term liabilities were $1.8 million and $19.2 million, respectively.

        The following table presents the weighted average remaining lease term and discount rate information related to the Company's operating and finance leases:
As of June 27, 2020
Operating LeasesFinance Lease
Weighted average remaining lease term5.717.89
Weighted average discount rate2.0 %5.1 %

        The following table provides information related to the Company’s operating and finance leases:
Three Months Ended June 27, 2020Nine Months Ended June 27, 2020
Operating lease cost (a)$6.9  $20.8  
Finance lease cost - amortization of right-of-use assets$—  $0.3  
Finance lease cost - interest cost$0.3  $0.8  
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases$0.3  $0.8  
Operating cash flows from operating leases$6.1  $17.8  
Financing cash flows from finance leases$0.4  $1.3  
Total cash paid for amounts included in the measurement of lease liabilities$6.8  $19.9  
ROU assets arising from entering into new operating lease obligations$6.0  $10.7  
(a) Includes short-term lease expense and variable lease costs, which were immaterial in the three and nine months ended June 27, 2020.
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        The following table presents the future minimum lease payments under non-cancellable operating lease liabilities and finance lease as of June 27, 2020:
Fiscal YearOperating LeasesFinance Lease
2020 remaining$6.0  $0.7  
202124.2  2.9  
202219.6  3.0  
202313.0  3.0  
202410.4  3.0  
Thereafter23.9  11.4  
Total future minimum lease payments97.1  24.0  
Less: imputed interest(5.9) (4.3) 
Present value of lease liabilities$91.2  $19.7  
Lessor Activity - Leases where Hologic is the Lessor

        Certain assets, primarily diagnostics instruments, are leased to customers under contractual arrangements that typically include an operating or sales-type lease as well as performance obligations for reagents and other consumables. These contractual arrangements are subject to termination provisions which are evaluated in determining the lease term for lease accounting purposes. Sales-type leases are not significant. Contract terms vary by customer and may include options to terminate the contract or options to extend the contract. Where instruments are provided under operating lease arrangements, some portion or the entire lease revenue may be variable and subject to subsequent non-lease component (e.g., reagent) sales. The allocation of revenue between the lease and non-lease components is based on stand-alone selling prices. Lease revenue represented approximately 4% of the aggregate principal amount ofCompany’s consolidated revenue for both the 2025 Senior Notes, plus accruedthree and unpaid interest from October 10, 2017, and (ii) $400 million of its new 4.625% Senior Notes due 2028 (the "2028 Senior Notes," and together with the New 2025 Senior Notes, the "New Notes") at an offering price of 100% of the aggregate principal amount of the 2028 Senior Notes.nine months ended June 27, 2020.

        In connection with the offeringdisposition of the New Notes,Medical Aesthetics business, the Company has called all ofentered into an agreement to sublease to Cynosure its outstanding 5.250% Senior Notes due 2022 (the "2022 Senior Notes"), in aggregate principal amount of $1.0 billion, for redemption on February 15, 2018 at an aggregate redemption price equal to the principal amount of the outstanding 2022 Senior Notes, plus the applicable premiumU.S. headquarters and accrued and unpaid interest through the day immediately preceding the redemption date.

Additionally, on January 29, 2018,manufacturing location. As such, the Company announced that pursuant to the terms of the indenturederecognized $10.2 million for the 2.00% Convertible Senior Notes due 2042 (the “2042 Notes”), holdersright-of-use asset for the finance lease, included in property, plant and equipment, and recorded a lease receivable, which is $19.7 million as of the 2042 Notes had the option of requiring the Company to repurchase their 2042 Notes on March 1, 2018 at a repurchase price payable in cash equal to 100% of the accreted principal amount of the 2042 Notes, plus accrued and unpaid interest to, but not including the put date. The Company also announced on January 29, 2018 that it had elected to redeem, on March 6, 2018, all of the then outstanding 2042 Notes at a redemption price payable in cash equal to 100% of the accreted principal amount of the 2042 Notes, plus accrued and unpaid interest to, but not including the redemption date. Holders also have a right to convert their 2042 Notes. In connection with holders’ right to convert the 2042 Notes, the Company announced that it would settle all conversions of 2042 Notes entirely in cash.June 27, 2020.




(2)(4) Fair Value Measurements
Assets/Liabilities Measured and Recorded at Fair Value on a Recurring Basis
The Company has investments in derivative instruments consisting of interest rate caps, interest rate swaps and forward foreign currency contracts, which are valued using analyses obtained from independent third party valuation specialists based on market observable inputs, representing Level 2 assets. The fair values of the Company's interest rate caps, andinterest rate swaps, forward foreign currency contracts and foreign currency option contracts represent the estimated amounts the Company would receive or pay to terminate the contracts. Refer to Note 68 for further discussion and information on the interest rate caps and forward foreign currency contracts.derivative instruments.
The Company has a payment obligation to the participants under its Nonqualified Deferred Compensation Plan (“DCP”). This liability is recorded at fair value based on the underlying value
17
Table of certain hypothetical investments under the DCP as designated by each participant for their benefit. Since the value of the DCP obligation is based on market prices, the liability is classified within Level 1.Contents
Assets and liabilities measured and recorded at fair value on a recurring basis consisted of the following at December 30, 2017:
June 27, 2020:
  Fair Value at Reporting Date Using  Fair Value at Reporting Date Using
Balance as of December 30, 2017 
Quoted Prices in
Active Market for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs (Level 2)
 
Significant
Unobservable
Inputs (Level 3)
 Balance as of June 27, 2020Quoted Prices in
Active Market for
Identical Assets
(Level 1)		Significant
Other
Observable
Inputs (Level 2)		Significant
Unobservable
Inputs (Level 3)
Assets:       Assets:
Interest rate cap - derivative5.3
 —
 5.3
 —
Foreign currency option contractsForeign currency option contracts0.1  —  0.1  —  
Forward foreign currency contracts0.4
 —
 0.4
 —
Forward foreign currency contracts0.2  —  0.2  —  
Total$5.7
 $—
 $5.7
 $—
Total$0.3  $—  $0.3  $—  
Liabilities:       Liabilities:
Deferred compensation liabilities$49.7
 $49.7
 $—
 $—
Contingent considerationContingent consideration0.9  $—  $—  $0.9  
Interest rate swaps - derivativeInterest rate swaps - derivative29.0  —  29.0  —  
Forward foreign currency contracts2.6
 —
 2.6
 —
Forward foreign currency contracts0.1  —  0.1  —  
Total$52.3
 $49.7
 $2.6
 $—
Total$30.0  $—  $29.1  $0.9  
Assets Measured and Recorded at Fair Value on a Recurring Basis
The Company had contingent consideration liabilities related to its Emsor S.A. and Faxitron Bioptics, LLC acquisitions. The Company settled these obligations for $9.8 million in the second quarter of fiscal 2019.
Assets Measured and Recorded at Fair Value on a Nonrecurring Basis
The Company remeasures the fair value of certain assets and liabilities upon the occurrence of certain events. Such assets consist of cost-method equity investments and long-lived assets, including property, plant and equipment, intangible assets and goodwill. There were no such remeasurements for equity investments in the three and nine months ended December 30, 2017June 27, 2020 and December 31, 2016.June 29, 2019. During the first quarter of fiscal 2020, the Company's Medical Aesthetics division met the criteria to be classified as assets-held-for sale and the Company recorded a $30.2 million loss to record the asset group at its fair value less costs to sell. This is a level 1 measurement. See Note 6 for additional information. During the second quarter of fiscal 2019, the Company identified indicators of impairment related to its long-lived assets of its Medical Aesthetics reportable segment and recorded impairment charges of $443.8 million, of which $437.0 million was allocated to intangible assets and $6.8 million was allocated to equipment. This was a level 3 measurement. See Note 15.
Disclosure of Fair Value of Financial Instruments
The Company’s financial instruments mainly consist of cash and cash equivalents, accounts receivable, cost-method equity investments, interest rate caps, interest rate swaps, forward foreign currency contracts, foreign currency option contracts, insurance contracts, DCP liability, accounts payable and debt obligations. The carrying amounts of the Company’s cash equivalents, accounts receivable and accounts payable approximate their fair value due to the short-term nature of these instruments. The Company’s interest rate caps, andinterest rate swaps, forward foreign currency contracts and foreign currency option contracts are recorded at fair value. The carrying amount of the insurance contracts areis recorded at the cash surrender value, as required by U.S. GAAP, which approximates fair value, and the related DCP liability is recorded at fair value. The Company believes the carrying amounts of its cost-method equity investments approximate fair value.
Amounts outstanding under the Company’s Amended and Restated2018 Credit Agreement and Securitization Program(as defined below) of $1.6$2.0 billion and $200.0 million aggregate principal respectively, as of December 30, 2017June 27, 2020 are subject to variable interest rates, of interestwhich are based on current market rates, and as such, the Company believes the carrying amount of these obligations approximates fair value. The Company’s 20222025 Senior Notes and 20252028 Senior Notes had a fair valuevalues of approximately $1.1 billion$959.7 million and $358.6$418.0 million, respectively, as of December 30, 2017June 27, 2020 based on their trading prices, representing a Level 1 measurement. The fair values of the Company’s Convertible Notes were based on the trading prices of the respective notes and represents a Level 1 measurement.measurements. Refer to Note 57 for the carrying amounts of the various components of the Company’s debt.


The estimated fair values of the Company’s Convertible Notes at December 30, 2017 were as follows:
2042 Notes284.8
2043 Notes0.3
 $285.1

(3)(5) Business Combinations


Cynosure Inc.Focal Therapeutics

On March 22, 2017,October 1, 2018, the Company completed the acquisition of Cynosure and acquired all of the outstanding shares of Cynosure. Each share of common stock of Cynosure outstanding immediately prior to the effective time of the acquisition was canceled and converted into the right to receive $66.00 in cash. In addition, all outstanding restricted stock units, performance stock units, and stock options were canceled and converted into the right to receive $66.00 per share in cash less the applicable exercise price, as applicable. The acquisition was funded through available cash, and the totalFocal Therapeutics, Inc. ("Focal") for a purchase price was $1.66 billion. The Company incurred $18.8of $120.1 million, which included hold-backs of transaction costs, which were recorded within general and administrative expenses.

Cynosure, headquartered in Westford, Massachusetts, develops, manufactures, and markets aesthetic treatment systems that enable plastic surgeons, dermatologists and other medical practitioners$14.0 million payable up to perform non-invasive and minimally invasive procedures to remove hair, treat vascular and benign pigmented lesions, remove multi-colored tattoos, revitalize the skin, reduce fat through laser lipolysis, reduce cellulite, clear nails infected by toe fungus, ablate sweat glands and improve women’s health. Cynosure also markets radiofrequency (RF) energy-sourced medical devices for precision surgical applications such as facial plastic and general surgery, gynecology, ear, nose, and throat procedures, ophthalmology, oral and maxillofacial surgery, podiatry and proctology. Cynosure's results of operations are reported in the Company's Medical Aesthetics reportable segmentone year from the date of acquisitionacquisition. In the second
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quarter of fiscal 2019, $1.5 million of the hold-back was paid, and the goodwill within this reportable segmentremaining $12.5 million was paid in the first quarter of fiscal 2020. Focal, headquartered in California, manufactures and markets its BioZorb marker, which is solely related to Cynosure.an implantable three-dimensional marker that helps clinicians overcome certain challenges in breast conserving surgery.

The total purchase price was allocated to Cynosure’sFocal's tangible and identifiable intangible assets and liabilities based on the estimated fair values of those assets as of October 1, 2018, as set forth below:
Cash$2.2 
Accounts receivable2.0 
Inventory7.9 
Other assets0.5 
Accounts payable and accrued expenses(5.6)
Long-term debt(2.5)
Identifiable intangible assets:
       Developed technology83.1 
       In-process research and development11.4 
       Trade names2.7 
Deferred income taxes, net(12.7)
Goodwill31.1 
Purchase Price$120.1 

In performing the purchase price allocation, the Company considered, among other factors, the intended future use of acquired assets, analysis of historical financial performance and estimates of future performance of Focal's business. As part of the purchase price allocation, the Company determined the identifiable intangible assets were developed technology, in-process research and development ("IPR&D"), and trade names. The fair value of the intangible assets was estimated using the income approach, and the cash flow projections were discounted using rates ranging from 15.5% to 16.5%. The cash flows were based on estimates used to price the transaction, and the discount rates applied were benchmarked with reference to the implied rate of return from the transaction model and the weighted average cost of capital. The weighted average life of developed technology and trade names was 11 years and 13 years, respectively. The calculation of the excess of the purchase price over the estimated fair value of the tangible net assets and intangible assets acquired was recorded to goodwill. The factors contributing to the recognition of the amount of goodwill were based on synergistic benefits that are expected to be realized from this acquisition. Benefits include the expectation of broadening the Company's Breast Health portfolio of products and technology. None of the goodwill is expected to be deductible for income tax purposes.

SuperSonic Imagine

On August 1, 2019, the Company purchased 46% of the outstanding shares of SuperSonic Imagine ("SSI") for $18.2 million. SSI is a public company located in Aix-en-Provence, France that manufactures and markets ultrasound medical imaging equipment. In September 2019, the Company launched a cash tender offer to acquire the remaining outstanding shares for a price of €1.50 per share in cash. The Company determined that SSI was a Variable Interest Entity (“VIE”) but it was not the primary beneficiary as it was not a party to the initial design of the entity nor did it have control over SSI's operations until November 21, 2019 when the Company's ownership of SSI's voting stock exceeded 50%. Accordingly, the Company initially accounted for this investment under the equity method of accounting and included its proportionate share of SSI's net loss of $3.3 million for the two months ended September 28, 2019 within Other income (expense), net.

On November 21, 2019, the Company acquired an additional 7.6 million shares of SSI for $12.6 million. As a result, the Company owned approximately 78% of the outstanding shares of SSI at November 21, 2019 and controlled SSI's voting interest and operations. The Company performed purchase accounting as of November 21, 2019 and beginning on that date the financial results of SSI are included within the Company's consolidated financial statements. The Company remeasured the initial investment of 46% of the outstanding shares of SSI to its fair value at the acquisition date, resulting in a gain of $3.2 million recorded in the first quarter of fiscal 2020. The total accounting purchase price was $69.3 million, which consisted of $17.9 million for the equity method investment in SSI, $12.6 million for shares acquired on November 21, 2019, $30.2 million for loans the Company provided to SSI prior to the acquisition that are considered forgiven, and $8.6 million representing the fair value of the noncontrolling interest as of November 21, 2019. As of June 27, 2020, the Company owned approximately 81% of the outstanding shares of SSI.

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Table of Contents
The total purchase price was allocated to SSI's preliminary tangible and identifiable intangible assets and liabilities based on the estimated fair values of those assets as of March 22, 2017,November 21, 2019, as set forth below. The preliminary purchase price allocation is as follows:

Cash$2.6 
Accounts receivable7.1 
Inventory10.0 
Property, plant and equipment6.5 
Other assets4.3 
Accounts payable and accrued expenses(13.0)
Deferred revenue(1.8)
Short and long-term debt(8.8)
Other liabilities(3.8)
Identifiable intangible assets:— 
       Developed technology38.3 
       Customer relationships4.0 
       Trade names3.0 
Deferred income taxes, net(1.5)
Goodwill22.4 
Purchase Price$69.3 
Cash$107.2
Marketable securities82.9
Accounts receivable40.2
Inventory121.1
Property, plant and equipment44.1
Other assets and liabilities, net12.2
Accounts payable and accrued expenses(75.3)
Deferred revenue(11.2)
Capital lease obligation(25.2)
Identifiable intangible assets: 
       Developed technology736.0
       In-process research and development107.0
       Distribution agreement42.0
       Customer relationships35.0
       Trade names74.0
Deferred income taxes, net(315.7)
Goodwill683.5
Purchase Price$1,657.8


In performing the preliminary purchase price allocation, the Company considered, among other factors, the intended future use of acquired assets, analysis of historical financial performance and estimates of future performance of Cynosure’s

SSI's business. The Company has not yet obtained all of the information related to the fair value of the acquired assets and liabilities, primarily income taxes and recognition of uncertain tax positions, to finalize the purchase price allocation.

As part of the preliminary purchase price allocation, the Company has determined the identifiable intangible assets are developed technology, in-process research and development ("IPR&D"), a distribution agreement, customer relationships, and trade names. The preliminary fair value of the intangible assets has been estimated using the income approach, and the cash flow projections were discounted using rates ranging from 11% to 12%, except for the IPR&D assets in which the Company used a range of 14% to 22%.12.0% rate. The cash flows are based on estimates used to price the transaction, and the discount rates applied were benchmarked with reference to the implied rate of return from the transaction model and the weighted average cost of capital.

The weighted average life for the developed technology assets are comprised of know-how, patents and technologies embedded in Cynosure's products and relate to currently marketed products. The developed technology assets primarily comprise the significant product families of Cynosure, primarily SculpSure, Icon, and PicoSure.

IPR&D projects relate to in-process projects that have not reached technological feasibility as of the acquisition date and have no alternative future use. The primary basis for determining technological feasibility of these projects is obtaining regulatory approval to market the underlying project or expected commercial release depending on the project. The Company recorded, on a preliminary basis, $107.0 million of IPR&D related to three projects, which were expected to be completed during fiscal 2018 and 2019 with a preliminary cost to complete of approximately $18.0 million. During the fourth quarter of fiscal 2017, the Company obtained regulatory approval for two projects with an aggregate fair value of $61.0 million and these assets were reclassified to developed technology. The remaining project is expected to be completed during fiscal 2019 with an estimated cost to complete of approximately $4.0 million. Given the uncertainties inherent with product development and introduction, there can be no assurance that any of the Company's product development efforts will be successful, completed on a timely basis or within budget, if at all. All of the IPR&D assets were valued using the multiple-period excess earnings method approach.

The distribution agreement intangible asset relates to Cynosure's exclusive distribution rights for the MonaLisa Touch device in certain geographic regions. The9 years, customer relationships intangible asset pertains to Cynosure's relationships with its end customers and related service arrangements and distributors throughout the world. Trade names relate to the Cynosure corporate name and primary product names, and the Company used the Relief-from-Royalty Method to estimate the fair value of this asset.

Developed technology, distribution agreement, customer relationshipsis 9 years and trade names are being amortized on a straight-line basis over a weighted average period of 11.8 years, 8 years, 7.7 years and 8.9 years, respectively.

is 8.6 years. The preliminary calculation of the excess of the purchase price over the estimated fair value of the tangible net assets and intangible assets acquired was recorded to goodwill. The factors contributing to the recognition of the preliminary amount of goodwill are based on several strategic and synergistic benefits that are expectedof SSI's products being complementary to be realized from the Cynosure acquisition. These benefits include the expectation thatBreast Health's 3D mammography systems and using the Company's entry into the aesthetics market will significantly broaden the Company's offering in women's health. The combined company is expected to benefit from a broader global presence, synergistic utilization of Hologic's directexisting U.S. sales force primarily its GYN Surgical sales force, with certain Cynosure products, andas SSI's presence in the Company's entry into an adjacent cash-pay segment.U.S. is limited. None of the goodwill is expected to be deductible for income tax purposes.


In fiscal 2017, Cynosure's revenue and pre-tax loss, which excludes acquisition expenses incurred by the Company, for the period from the acquisition date to SeptemberAlpha Imaging

On December 30, 2017 were $207.5 million and $96.4 million, respectively. The pre-tax loss includes amortization expense, the impact of the step-up in inventory, retention and integration expenses including legal and consulting fees, and restructuring charges. The following unaudited pro forma information presents the combined financial results for the Company and Cynosure as if the acquisition of Cynosure had been completed at the beginning of the prior fiscal year, September 26, 2015 (fiscal 2016):


 Three Months Ended
 December 31, 2016
 (unaudited)
Revenue$856.3
Net income$74.1
Basic earnings per common share$0.27
Diluted earnings per common share$0.26

The unaudited pro forma information for the three months ended December 31, 2016 (the first quarter of fiscal 2017) was calculated after applying the Company's accounting policies and the impact of acquisition date fair value adjustments. The pro forma condensed consolidated financial results have been prepared for comparative purposes only and include certain adjustments to reflect pro forma results of operations as if the acquisition occurred on September 27, 2015 (the beginning of fiscal 2016), such as increased amortization for the fair value of acquired intangible assets. The pro forma information does not reflect the effect of costs or synergies that would have been expected to result from the integration of the acquisition. The pro forma information does not purport to be indicative of the results of operations that actually would have resulted had the combination occurred at the beginning of the period presented, or of future results of the consolidated entities.
Medicor Medical Supply

On April 7, 2017,2019, the Company completed the acquisition of MMS Medicor Medical Supplies GmbHassets from Alpha Imaging, LLC ("Medicor"Alpha Imaging"), for a purchase price of approximately $19.0$18.0 million, which includesincluded a working capital adjustmenthold-back of $2.0$1.0 million that was paid inand contingent consideration which the fourth quarter of fiscal 2017, and a holdback of $1.9 million thatCompany has estimated at $0.9 million. The contingent consideration is payable two years fromupon shipment of backlog orders entered into by Alpha Imaging prior to the date of acquisition. MedicorAlpha Imaging was a long-standing distributor of the Company's Breast and Skeletal Health products in Germany, Austria and Switzerland.the U.S. Based on the Company's preliminary valuation, it has allocated $5.4$18.1 million of the purchase price to the preliminary value ofa customer relationships intangible assets,asset, which havehas a weighted averageuseful life of 7.7 years, and $8.9 million to goodwill. The remaining $4.7 million of purchase price has been allocated to the acquired tangible assets and liabilities.5 years. The allocation of the purchase price is preliminary as the Company continues to gather information supporting the acquired assets and liabilities.


Emsor, S.A.Health Beacons


On December 11, 2017,February 3, 2020, the Company completed the acquisition of Emsor S.A.Health Beacons, Inc. ("Emsor"Health Beacons"), for a purchase price of approximately $13.1$19.3 million, which includes a holdbackincluded hold-backs of $0.5$2.3 million that isare payable up to eighteen months from the date of acquisition, and contingent consideration whichacquisition. Health Beacons manufactures the Company has estimated at $2.0 million. The contingent consideration is payable upon Emsor achieving predefined amounts of cumulative revenue over a two year period from the date of acquisition. Emsor was a distributor of the Company's Breast and Skeletal Health products in Spain and Portugal.LOCalizer product. Based on the Company's preliminary valuation, it has allocated $2.8$10.7 million of the purchase price to the preliminary value of intangible assets and $3.5$5.7 million to goodwill. The remaining $6.8$2.9 million of the purchase price has been allocated to acquired tangible assets and liabilities. The allocation of the purchase price is preliminary as the Company continues to gather information supporting the acquired assets and liabilities.

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(6) Disposition
(4) Restructuring ChargesSale of Medical Aesthetics

On November 20, 2019, the Company entered into a definitive agreement to sell its Medical Aesthetics business to Clayton Dubilier & Rice ("CD&R") for a sales price of $205.0 million in cash, less certain adjustments. The sale was completed on December 30, 2019, and the Company received cash proceeds of $153.4 million. The sale price remains subject to adjustment pursuant to the terms of the definitive agreement. The Company evaluatesagreed to provide certain transition services for three to fifteen months, depending on the nature of the service. The Company also agreed to indemnify CD&R for certain legal and tax matters that existed as of the date of disposition. In connection with its operationsaccounting for opportunities to improve operational effectiveness and efficiency, including facility and operations consolidation, and to better align expenses with revenues. In addition,the sale, the Company continually assessesrecorded indemnification liabilities of $10.9 million within accrued expenses associated with its management and organizational structure. obligations under the sale agreement.

As a result of these assessments,this transaction, the Company has undertaken various restructuring actions, which are described below. The following table displays charges related to these actions recordedMedical Aesthetics asset group was designated as assets held-for-sale in the fiscal 2018 year to date period (three months ended December 30, 2017) and fiscal 2017 (the year ended September 30, 2017) and a rollforward of the accrued balances from September 30, 2017 to December 30, 2017:

  Fiscal 2018 Actions Fiscal 2017 Actions Fiscal 2016 Actions Total    
Restructuring Charges        
Fiscal 2017 charges:       
Workforce reductions $—
 $8.5
 $—
 $8.5
Facility closure costs —
 —
 4.8
 4.8
Fiscal 2017 restructuring charges $—
 $8.5
 $4.8
 $13.3
Fiscal 2018 charges:        
Workforce reductions $3.8
 $—
 $—
 $3.8
Fiscal 2018 restructuring charges $3.8
 $—
 $—
 $3.8
  Fiscal 2018 Actions Fiscal 2017 Actions Fiscal 2016 Actions Other Total    
Rollforward of Accrued Restructuring          
Balance as of September 30, 2017 $—
 $7.5
 $3.7
 $0.3
 $11.5
Fiscal 2018 charges 3.8
 —
 —
 —
 3.8
Stock-based compensation (1.3) —
 —
 —
 (1.3)
Severance payments and adjustments (0.9) (2.3) (0.2) —
 (3.4)
Other payments —
 —
 (0.3) (0.1) (0.4)
Balance as of December 30, 2017 $1.6
 $5.2
 $3.2
 $0.2
 $10.2
Fiscal 2018 Actions
During the first quarter of fiscal 2018,2020. Pursuant to ASC 360, asset groups under this designation are required to be recorded at fair value less costs to sell. The Company determined that this disposal did not qualify as a discontinued operation as the sale of the Medical Aesthetics business was deemed to not be a strategic shift having or will have a major effect on the Company's operations and financial results. Based on the terms in the agreement of the sales price and formula for net working capital and related adjustments, its estimate of the fair value for transition services and the amount that must be carved out of the sale proceeds, and liabilities the Company decidedwill retain or for which it has agreed to terminate certain employees across the organization, including a corporate executive and sales and marketing personnel in its Diagnostics and Medical Aesthetics reportable segments. The charges were recorded pursuant to ASC 712, Compensation-Nonretirement Postemployment Benefits (ASC 712) or ASC 420, Exit or Disposal Cost Obligations (ASC 420) depending on the employee. As such,indemnify CD&R, the Company recorded severance and benefits chargesan impairment charge of $3.8$30.2 million in the first quarter. Included within thisquarter of fiscal 2020. The impairment charge was allocated to Medical Aesthetics long-lived assets, of which $25.8 million was allocated to cost of product revenues and $4.4 million to operating expenses. The Company is $1.3 millioncurrently in the process of evaluating adjustments to the final sales price.

The assets and liabilities of the disposed business at the date of disposition were as follows:
Assets:
Cash$10.7 
Accounts Receivable59.6 
Inventory90.6 
Prepaid expenses and other current assets7.7 
Property, plant, and equipment4.0 
Intangible assets28.2 
Other assets9.8 
Total assets disposed of$210.6 
Liabilities:
Accounts payable$12.3 
Accrued expenses49.0 
Deferred revenue16.6 
Total liabilities disposed of$77.9 

Loss from operations of the disposed business presented below represents the operating loss of the business as it was operated prior to the date of disposition. The operating expenses include only those that were incurred directly by and were retained by the disposed business. As noted above, the Company is performing a number of transition services and the financial impact from these services are not included in the amounts presented below. In addition, the Company will continue to incur expenses related to this business under the modificationindemnification provisions primarily related to legal and tax matters that existed as of equity awards.
Fiscal 2017 Actions
In connection with its acquisitionthe date of Cynosure,disposition, which it will continue to report in the Company decided to terminate certain Cynosure executives inMedical Aesthetic reportable segment. In the second quarter of fiscal 2017 and recorded $1.5 million in severance and benefits charges. During the third and fourth quarters of fiscal 2017,2020, the Company terminated additional executives and employees and recorded $4.3 million and $1.3 million, respectively,accelerated stock compensation in severance and benefits charges.
Fiscal 2016 Actions
In connection with the closure of the Bedford, Massachusetts facility, during the first quarter of fiscal 2017 the Company recorded $3.5disposition, legal expenses for retained cases and other adjustments totaling $2.4 million, for lease obligation charges related to a section of the facility that the Company had determined met the cease-use date criteria. The Company made certain assumptions regarding the time period it would take to obtain a subtenant and the sublease rates it can obtain. Duringwhich is not included below. In the third quarter of fiscal 2017,2020, the Company updated its assumption regarding the time period it will takerecorded $1.0 million primarily related to obtain a subtenant at the Bedford locationlegal expenses and as a result recorded an additional $1.3 million lease obligation charge. These estimates may varysettlements. Loss from the actual sublease agreements executed, if at all, resulting in an adjustment to the charge. The Company has vacated other portionsoperations of the building but notdisposed business for the entire facility,three and at this time does not meet the cease-use date criteria to record additional restructuring charges.nine month periods ended June 27, 2020 and June 29, 2019 was as follows:

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Three Months EndedNine Months Ended
June 27, 2020June 29, 2019June 27, 2020June 29, 2019
Loss from operations$—  $(14.3) $(46.5) $(503.0) 


(5)
(7) Borrowings and Credit Arrangements
The Company’s borrowings consisted of the following:
June 27,
2020		September 28,
2019
Current debt obligations, net of debt discount and deferred issuance costs:
Term Loan$65.5  $37.4  
Revolver500.0  —  
Securitization Program—  234.0  
Total current debt obligations$565.5  $271.4  
Long-term debt obligations, net of debt discount and deferred issuance costs:
Term Loan1,398.0  1,452.4  
2025 Senior Notes938.9  937.3  
2028 Senior Notes394.4  393.9  
Total long-term debt obligations$2,731.3  $2,783.6  
Total debt obligations$3,296.8  $3,055.0  
 December 30,
2017		 September 30,
2017
Current debt obligations, net of debt discount and deferred issuance costs:   
Term Loan$46.7
 $121.3
Revolver120.0
 345.0
Securitization Program200.0
 200.0
Convertible Notes205.4
 484.5
Total current debt obligations$572.1
 $1,150.8
Long-term debt obligations, net of debt discount and deferred issuance costs:   
Term Loan1,430.1
 1,190.5
2022 Senior Notes982.6
 981.6
2025 Senior Notes345.0
 —
Total long-term debt obligations$2,757.7
 $2,172.1
Total debt obligations$3,329.8
 $3,322.9
2018 Amended and Restated Credit Agreement
On October 3, 2017,December 17, 2018, the Company and certain of its domestic subsidiaries enteredrefinanced its term loan and revolving credit facility by entering into an Amended and Restated Credit and Guaranty Agreement as of December 17, 2018 (the "Amended and Restated"2018 Credit Agreement") with Bank of America, N.A. in its capacity as Administrative Agent, Swing Line Lender and L/C Issuer, and certain other lenders from time to time party thereto.lenders. The Amended and Restated2018 Credit Agreement amendsamended and restatesrestated the Company's prior credit and guaranty agreement originally dated as of May 29, 2015October 3, 2017 (the "Prior"2017 Credit Agreement"). The proceeds under the Amended and Restated Credit Agreement of $1.8 billion were used, among other things, to pay off the Term Loan of $1.32 billion and the Revolver then outstanding under the Company's Prior Credit Agreement. Borrowings under the Amended and Restated Credit Agreement are secured by first-priority liens on, and a first-priority security interest in, substantially all of the assets of the Company's U.S. subsidiaries, with certain exceptions.

The credit facilities (the “Amended and Restated Credit Facilities”) under the Amended and Restated Credit Agreement consist of:

A $1.5 billion secured term loan to the Company ("Amended Term Loan") with a maturity date of October 3, 2022; and
A secured revolving credit facility (the "Amended Revolver") under which the the Company may borrow up to $1.5 billion, subject to certain sublimits, with a maturity date of October 3, 2022.

At the closing, the Company borrowed $345 million under the Amended Revolver, which was fully repaid during October 2017. As of December 30, 2017, the Company had $120.0 million outstanding under the Amended Revolver.

Borrowings under the Amended and Restated Credit Facilities bear interest, at the Company's option and in each case plus an applicable margin as follows:

Amended Term Loan: at the Base Rate, Eurocurrency Rate or LIBOR Daily Floating Rate (as defined in the Amended and Restated Credit Agreement), 
Amended Revolver: if funded in U.S. dollars, the Base Rate, Eurocurrency Rate, or LIBOR Daily Floating Rate, and, if funded in an alternative currency, the Eurocurrency Rate; and if requested under the swing line sublimit, the Base Rate.

The applicable margin to the Base Rate, Eurocurrency Rate, or LIBOR Daily Floating Rate is subject to specified changes depending on the total net leverage ratio as defined in the Amended and Restated Credit Agreement. The borrowings of the 2018 Amended Term Loan initially bear interest at an annual rate equal to the Eurocurrency Rate (i.e., the LIBOR rate) plus an Applicable Rate, which was equal to 1.50%.1.375% as of June 27, 2020. The borrowings of the 2018 Amended Revolver initially bear interest at a rate equal to the LIBOR Daily Floating Rate plus an Applicable Rate equal to 1.50%1.375%. The Company is also required to pay a quarterly commitment fee calculated on the undrawn committed amount available under the Amended Revolver.


The Company is required to make scheduled principal payments under the Amended Term Loan in increasing amounts ranging from $9.375 million per three-month period commencing with the three-month period ending on December 29, 2017 to $37.5 million per three-month period commencing with the three-month period ending on December 23, 2021. The remaining balance of the Amended Term Loan and any amounts outstanding under the Amended Revolver are due at maturity. In addition, subject to the terms and conditions set forth in the Amended and Restated Credit Agreement, the Company is required to make certain mandatory prepayments from the net proceeds of specified types of asset sales (subject to certain reinvestment rights), debt issuances and insurance recoveries (subject to certain reinvestment rights). These mandatory prepayments are required to be applied by the Company, first, to the Amended Term Loan, second, to any outstanding amount under any Swing Line Loans (as defined in the Amended and Restated Credit Agreement), third, to the Amended Revolver, fourth to prepay any outstanding reimbursement obligations with respect to Letters of Credit (as defined in the Amended and Restated Credit Agreement) and fifth, to cash collateralize any Letters of Credit. Subject to certain limitations, the Company may voluntarily prepay any of the Amended and Restated Credit Facilities without premium or penalty.

Borrowings outstanding under the Amended and Restated Credit Agreement and the Prior Credit Agreement for the three months ended December 30, 2017 and December 31, 2016 had weighted-average interest rates of 2.75% and 2.05%, respectively. The interest rate on the outstanding Amended Term Loan borrowing at December 30, 2017 was 3.07%. Interest expense under the Amended and Restated Credit Agreement aggregated $12.4 million for the three months ended December 30, 2017, which includes non-cash interest expense of $0.7 million related to the amortization of the deferred issuance costs and accretion of the debt discount. Interest expense under the Prior Credit Agreement aggregated $9.8 million for the three months ended December 31, 2016, which includes $1.1 million of non-cash interest expense related to the amortization of the deferred issuance costs and accretion of the debt discount.

The Amended and Restated Credit Agreement contains affirmative and negative covenants customarily applicable to senior secured credit facilities, including covenants restricting the ability of the Company, subject to negotiated exceptions, to incur additional indebtedness and grant additional liens on its assets, engage in mergers or acquisitions or dispose of assets, enter into sale-leaseback transactions, pay dividends or make other distributions, voluntarily prepay other indebtedness, enter into transactions with affiliated persons, make investments, and change the nature of their businesses. In addition, the Amended and Restated Credit Agreement requires the the Company to maintain certain financial ratios. The Amended and Restated Credit Agreement also contains customary representations and warranties and events of default, including payment defaults, breach of representations and warranties, covenant defaults, cross defaults and an event of default upon a change of control of the Company.

Borrowings are secured by first-priority liens on, and a first-priority security interest in, substantially all of the assets of the Company, with certain exceptions. For example, borrowings under the Amended and Restated Credit Agreement are not secured by those accounts receivable that are transferred to the special purpose entity under the Company's Accounts Receivable Securitization program. The Amended and Restated Credit Agreement contains total net leverage ratio and interest coverage ratio financial covenants measured as of the last day of each fiscal quarter and an excess cash flow prepayment requirement measured as of the end of each fiscal year. The total net leverage ratio was 5.00:1.00 beginning on the Company's fiscal quarter ended December 30, 2017, and then decreases over time to 4.50:1.00 for the quarter ending March 27, 2021. The interest coverage ratio was 3.75:1.00 beginning on the Company's fiscal quarter ended December 30, 2017, and remains as such for each quarter thereafter. The total net leverage ratio is defined as the ratio of the Company's consolidated net debt as of the quarter end to its consolidated adjusted EBITDA (as defined in the Amended and Restated Credit Agreement) for the four-fiscal quarter period ending on the measurement date. The interest coverage ratio is defined as the ratio of the Company's consolidated adjusted EBITDA for the prior four-fiscal quarter period ending on the measurement date to adjusted consolidated cash interest expense (as defined in the Amended and Restated Credit Agreement) for the same measurement period. The Company was in compliance with these covenants as of December 30, 2017.

The Company evaluated the Amended and Restated Credit Agreement for derivatives pursuant to ASC 815, Derivatives and Hedging, and identified embedded derivatives that required bifurcation as the features are not clearly and closely related to the host instrument. The embedded derivatives were a default provision, which could require additional interest payments, and a provision requiring contingent payments to compensate the lenders for changes in tax deductions. The Company determined that the fair value of these embedded derivatives was nominal as of December 30, 2017.

Pursuant to ASC 470, Debt (ASC 470), the accounting forrelated to entering into the Amended2018 Credit Agreement and Restatedusing the proceeds to pay off the 2017 Credit Agreement was evaluated on a creditor-by-creditor basis with regard to the Amended and Restated Credit Agreement to determine whether each transaction should be accounted for as a modification or extinguishment. Certain creditors under the Amended and Restated2017 Credit Agreement did not participate in this refinancing transaction and ceased being creditors of the Company. As a result, the Company recorded a debt extinguishment loss of $1.0$0.8 million in the first quarter of fiscal 2018 to write-off the pro-rata amount

of unamortized debt discount and deferred issuance costs related to these creditors.2019. For the remainder of the creditors, this transaction was accounted for as a modification because on a creditor-by-creditor basis the present value of the cash flows between the two debt instruments before and after the transaction was less than 10%. Pursuant to ASC 470, subtopic 50-40, third-party costs of $1.7$0.8 million related to this transaction were recorded as interest expense and $4.9$1.9 million was recorded as a reduction to debt representing deferred issuance costs and debt discount for fees paid directly to the lenders.


2025 In response to the market uncertainties created by the COVID-19 pandemic in March 2020, the Company borrowed $750 million under its revolver, $250 million of which was used to pay off amounts outstanding under the asset securitization agreement, in order to have sufficient cash on hand. During the third quarter of fiscal 2020, the Company paid down$250.0 million on its revolver, and it intends to repay the remainder within one year. The Company has $1.0 billion available under its revolver as of June 27, 2020.

Interest expense, weighted average interest rates, and the interest rate at the end of period under the Credit Agreements were as follows: 
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Three Months EndedNine Months Ended
June 27, 2020June 29, 2019June 27, 2020June 29, 2019
Interest expense$11.4  $16.4  $38.0  $51.9  
Weighted average interest rate1.68 %3.85 %2.52 %3.84 %
Interest rate at end of period1.55 %3.78 %1.55 %3.78 %

The 2018 Credit Agreement contains two financial covenants; a total leverage ratio and an interest coverage ratio, both of which are measured as of the last day of each fiscal quarter. These terms, and calculations thereof, are defined in further detail in the 2018 Credit Agreement. As of June 27, 2020, the Company was in compliance with these covenants.

Senior Notes


On October 10, 2017, the Company completed a private placement of $350 million aggregate principal amount of its 4.375% Senior Notes due 2025 (the “2025"2025 Senior Notes”Notes") at an offering price of 100% of the aggregate principal amount of the 2025 Senior Notes. The 2025 Senior Notes are general senior unsecured obligations of the Company and are guaranteed on a senior unsecured basis by certain domestic subsidiaries of Hologic (the “ 2025 Domestic Guarantors”).


The 2025 Senior Notes mature on October 15, 2025 and bear interest at the rate of 4.375% per year, payable semi-annually on April 15 and October 15 of each year, commencing on April 15, 2018. The Company recorded interest expense of $3.5 million for the three months ended December 30, 2017 which includes non-cash interest expense of $0.1 million related to the amortization of the deferred issuance costs and accretion of the debt discount.

The Company may redeem the 2025 Senior Notes at any time prior to October 15, 2020 at a price equal to 100% of the aggregate principal amount so redeemed, plus accrued and unpaid interest, if any, to the redemption date and a make-whole premium set forth in the Indenture. The Company may also redeem up to 35% of the aggregate principal amount of the 2025 Senior Notes with the net cash proceeds of certain equity offerings at any time and from time to time before October 15, 2020, at a redemption price equal to 104.375% of the aggregate principal amount so redeemed, plus accrued and unpaid interest, if any, to the redemption date. The Company also has the option to redeem the 2025 Senior Notes on or after: October 15, 2020 through October 14, 2021 at 102.188% of par; October 15, 2021 through October 14, 2022 at 101.094% of par; and October 15, 2022 and thereafter at 100% of par. In addition, if the Company undergoes a change of control coupled with a decline in ratings, as provided in the 2025 Indenture, the Company will be required to make an offer to purchase each holder’s 2025 Senior Notes at a price equal to 101% of their principal amount, plus accrued and unpaid interest, if any, to the repurchase date.

On January 19, 2018, the Company completed a private placement of $1.0 billion aggregate principal amount of senior notes, which included $600 million of additional 4.375% Senior Notes due 2025 (the “New 2025 Senior Notes”), issued under a supplement to the 2025 Indenture. See “Subsequent Events” below.

2022 Senior Notes

The Company's 5.250% Senior Notes due 2022 (the “2022 Senior Notes”) mature on July 15, 2022 and bear interest at the rate of 5.250% per year, payable semi-annually on January 15 and July 15 of each year, commencing on January 15, 2016. The Company recorded interest expense of $14.0 million and $15.1 million for the three months ended December 30, 2017 and December 31, 2016, respectively, which includes non-cash interest expense of $1.0 million and $1.0 million, respectively, related to the amortization of the deferred issuance costs and accretion of the debt discount.

In connection with the offering of the New 2025 Senior Notes and the Company’s 4.625% Senior Notes due 2028, the Company has called all of its outstanding 2022 Senior Notes, in the aggregate principal amount of $1.0 billion, for redemption on February 15, 2018 at an aggregate redemption price equal to the principal amount of the outstanding 2022 Senior Notes, plus the applicable premium and accrued and unpaid interest through the day immediately preceding the redemption date. See “Subsequent Events” below.

Convertible Notes

On various dates during the first quarter of fiscal 2018, the Company entered into privately negotiated repurchase transactions and extinguished $39.3 million principal amount of its 2.00% Convertible Senior Notes due 2042 (the "2042 Notes") for total payments of $52.8 million. This amount includes the conversion premium resulting from the Company's stock price on the date of the transactions being in excess of the conversion prices of $31.175. As a result, on a gross basis, $13.4 million of the consideration paid was allocated to the reacquisition of the equity component of the original instrument, which was recorded net of deferred taxes of $3.8 million within additional paid-in-capital.
On December 15, 2017, pursuant to the provisions of the indenture governing the Company's 2.00% Convertible Senior Notes due December 15, 2043 (the "2043 Notes"), the Company redeemed or repurchased an aggregate of $201.7 million in original principal amount of the 2043 Notes then outstanding for an aggregate repurchase price of approximately $244.1

million, representing the then accreted principal amount of the 2043 Notes. The remaining $0.3 million in original principal amount of the 2043 Notes were converted, and the Company elected to settle these conversions, which will occur in the second quarter of fiscal 2018.

The term "Convertible Notes" refers to the 2042 Notes and the 2043 Notes.
Interest expense under the Convertible Notes was as follows:
 Three Months Ended
 December 30,
2017		 December 31,
2016
Amortization of debt discount$2.9
 $5.2
Amortization of deferred financing costs0.1
 0.2
Principal accretion1.6
 4.6
Non-cash interest expense4.6
 10.0
2.00% accrued interest (cash)1.1
 2.0
 $5.7
 $12.0
Subsequent Events
2025 Senior Notes and 2028 Senior Notes
On January 19, 2018, the Company completed a private placement of $1.0 billion aggregate principal amount of senior notes, allocated between (i) an additional $600 million aggregate principal amounts of its 2025 Senior Notes pursuant to a supplement to the indenture governing the Company's existing 2025 Senior Notes at an offering price of 100% of the aggregate principal amount of the 2025 Senior Notes plus accrued and unpaid interest from October 10, 2017 and (ii) $400 million aggregate principal amounts of its 4.625% Senior Notes due 2028 (the "2028 Senior Notes") at an offering price of 100% of the aggregate principal amount of the 2028 Senior Notes.

2025 Senior Notes

The newtotal aggregate principal balance of 2025 Senior Notes have the same terms as the existingis $950 million. The 2025 Senior Notes.Notes are general senior unsecured obligations of the Company and are guaranteed on a senior unsecured basis by certain domestic subsidiaries and mature on October 15, 2025.

2028 Senior Notes
The aggregate principal balance of the 2028 Senior Notes is $400 million. The 2028 Senior Notes are general senior unsecured obligations of the Company and are guaranteed on a senior unsecured basis by certain domestic subsidiaries of Hologic (the “2028 Domestic Guarantors”).

The 2028 Senior Notes were issued pursuant to an indenture (the “2028 Indenture”), dated as of January 19, 2018 among the Company, the 2028 Domestic Guarantors and Wells Fargo Bank, National Association, as trustee. The 2028 Senior Notes mature on February 1, 2028 and bear interest at the rate of 4.625% per year, payable semi-annually on February 1 and August 1 of each year, commencing on August 1, 2018. The 2028 Indenture contains covenants which limit, among other things, the ability of the Company and the Guarantors to create liens and engage in certain sale and leaseback transactions. These covenants are subject to a number exceptions and qualifications.2028.

The Company may redeemInterest expense for the 2028 Senior Notes at any time prior to February 1, 2023 at a price equal to 100% of the aggregate principal amount so redeemed, plus accrued and unpaid interest, if any,2025 Senior Notes is as follows:
Three Months EndedNine Months Ended
June 27, 2020June 29, 2019June 27, 2020June 29, 2019
Interest RateInterest ExpenseInterest ExpenseInterest ExpenseInterest Expense
2028 Senior Notes4.625 %$4.8  $4.8  $14.4  $14.4  
2025 Senior Notes4.375 %10.9  10.9  32.7  32.7  
Total$15.7  $15.7  $47.1  $47.1  

Accounts Receivable Securitization Program

In response to the redemption datemarket uncertainties created by the COVID-19 pandemic, on March 26, 2020, the Company paid-off the total amount outstanding of $250.0 million previously borrowed under the Accounts Receivable Securitization Program (the "Securitization Program"). On April 13, 2020, the Company amended the Credit and a make-whole premium set forth inSecurity agreement with the Indenture. The Company may also redeemlenders, temporarily suspending the ability to borrow and the need to comply with covenants for up to 35%a year. As of the aggregate principal amount of the 2028 Senior Notes with the net cash proceeds of certain equity offerings at any time and from time to time before February 1, 2021, at a redemption price equal to 104.625% of the aggregate principal amount so redeemed, plus accrued and unpaid interest, if any, to the redemption date. The Company also has the option to redeem the 2028 Senior Notes on or after: February 1, 2023 through February 1, 2024 at 102.312% of par; February 1, 2024 through February 1, 2025 at 101.541% of par; February 1, 2025 through February 1, 2026 at 100.770% of par; and February 1, 2026 and thereafter at 100% of par. In addition, ifJune 27, 2020, the Company undergoes a changedid not have any borrowings under this program.

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Table of control coupled with a decline in ratings, as provided in the 2028 Indenture, the Company will be required to make an offer to purchase each holder’s 2028 Senior Notes at a price equal to 101% of their principal amount, plus accrued and unpaid interest, if any, to the repurchase date.Contents
2042 Notes
On January 29, 2018, the Company announced that pursuant to the terms of the indenture for the 2.00% Convertible Senior Notes due 2042 (the “2042 Notes”), holders of the 2042 Notes had the option of requiring the Company to repurchase their 2042 Notes on March 1, 2018 at a repurchase price payable in cash equal to 100% of the accreted principal amount of the 2042 Notes, plus accrued and unpaid interest to, but not including the put date. The accreted principal amount of the 2042 notes will be $206.0 million as of the repurchase date. The Company also announced on January 29, 2018 that, it had elected to redeem, on March 6, 2018, all of the then outstanding 2042 Notes at a redemption price payable in cash equal to 100% of the accreted principal amount of the 2042 Notes, plus accrued and unpaid interest to, but not including the redemption date.

Holders also have a right to convert their 2042 Notes. Based on a closing price of the Company’s common stock of $42.75 per share (the closing price for the Company’s common stock on December 29, 2017), the conversion value for the outstanding 2042 notes would be $1,371 per $1,000 of original principal amount of the notes, or $282.6 million in the aggregate. The conversion value of the notes would increase or decrease to the extent that the trading price of the Company’s common stock increases or decreases. The Company has elected to settle any conversion of the 2042 Notes entirely in cash.


(6)(8) Derivatives
Interest Rate Cap - Cash Flow Hedge
The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company manages its exposure to some of its interest rate risk through the use of interest rate caps, which are derivative financial instruments. The Company does not use derivatives for speculative purposes. For a derivative that is designated as a cash flow hedge, changes in the fair value of the derivative are recognized in accumulated other comprehensive income ("AOCI") to the extent the derivative is effective at offsetting the changes in the cash flows being hedged until the hedged item affects earnings. To the extent there is any hedge ineffectiveness, changes in fair value relating to the ineffective portion are immediately recognized in earnings in other income (expense), net in the Consolidated Statements of Income.Operations.
During fiscal 2015,2018, the Company entered into separate interest rate cap agreements with multiple counter-parties to help mitigate the interest rate volatility associated with the variable interest rate on amounts borrowed under the term loan feature of its credit facilities (see Note 6)7). Interest rate cap agreements provide the right to receive cash if the reference interest rate rises above a contractual rate. The aggregate premium paid for thethese interest rate cap agreements was $13.2$3.7 million, which was the initial fair value of the instruments recorded in the Company's financial statements.
During fiscal 2017,2019, the Company entered into newadditional separate interest rate cap agreements with multiple counter-parties to extend the expiration date of its hedges by an additional year. The aggregate premium paid for thethese interest rate cap agreements was $1.9$1.5 million, which was the initial fair value of the instruments recorded in the Company'sCompany’s financial statements.
The critical terms of the interest rate caps were designed to mirror the terms of the Company’s LIBOR-based borrowings under its Prior Credit Agreement, and Amended and Restated Credit Agreementthat has been amended multiple times, and therefore are highly effective at offsetting the cash flows being hedged. The Company designated these derivatives as cash flow hedges of the variability of the LIBOR-based interest payments on $1.0 billion of principal, which ended on December 29, 201727, 2019 for the contracts entered into in fiscal 2018, and which will end on December 30, 201823, 2020 for the interest rate cap agreements entered into in fiscal 2015 and fiscal 2017, respectively.2019.
As of December 30, 2017, the Company determined that the existence of hedge ineffectiveness, if any, was immaterial, andJune 27, 2020, all changes in the fair value of the interest rate caps were recorded in the Consolidated Statements of Comprehensive Income as a component of AOCI.(Loss).
During the three and nine months ended December 30, 2017June 27, 2020 and December 31, 2016, $2.3June 29, 2019, the Company reclassified $0.3 million and $2.1$2.0 million, respectively was reclassifiedand $0.8 million and $2.0 million, respectively from AOCI to the Company’s Consolidated Statements of IncomeOperations related to the interest rate cap agreements. The Company expects to similarly reclassify a loss of approximately $1.9$0.8 million from AOCI to the Consolidated Statements of IncomeOperations in the next twelvesix months.
The aggregate fair value of these interest rate caps was $5.3$0.0 million and $4.8$0.1 million at December 30, 2017June 27, 2020 and September 30, 2017,28, 2019, respectively, and is included in Prepaidprepaid expenses and other current assets on the Company’s Consolidated Balance Sheet. Refer to Note 24 “Fair Value Measurements” above for related fair value disclosures.
Interest Rate Swap - Cash Flow Hedge
In fiscal 2019, in order to hedge a portion of its variable rate debt beyond the contracted period under interest cap agreements, the Company entered into an interest rate swap contract with an effective date of December 23, 2020 and a termination date of December 17, 2023. The notional amount of this swap is $1.0 billion. The interest rate swap effectively fixes the LIBOR component of the variable interest rate on $1.0 billion of the notional amount under the 2018 Credit Agreement at 1.23%. The critical terms of the interest rate swap are designed to mirror the terms of the Company’s LIBOR-based borrowings under its credit agreement and therefore are highly effective at offsetting the cash flows being hedged. The Company designated this derivative as a cash flow hedge of the variability of the LIBOR-based interest payments on $1.0 billion of principal. Therefore, changes in the fair value of the swap are recorded in AOCI and were losses of $4.6 million and $25.4 million for the three and nine months ended June 27, 2020, respectively. The fair value of this derivative was in a liability position of $29.0 million as of June 27, 2020.
Forward Foreign Currency Contracts and Foreign Currency Option Contracts
The Company enters into forward foreign currency exchange contracts and foreign currency option contracts to mitigate certain operational exposures from the impact of changes in foreign currency exchange rates. Such exposures result from the portion of the Company's operations that are denominated in currencies other than the U.S. dollar, primarily the Euro, the UK Pound, the Australian dollar, the Canadian dollar, the Chinese Yuan and the Japanese Yen. These foreign currency exchange contracts are entered into to support transactions made in the ordinary course of business and are not speculative in nature. The contracts are generally for periods of one year or less. The Company hasdid not electedelect hedge accounting for any of the forward foreign currency contracts it has executed;these contracts; however, the Company may seek to apply hedge accounting in future scenarios. The change in the fair value of these contracts is recognized directly in earnings as a component of other income (expense), net. During
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The following table presents the three months ended December 30, 2017 and December 31, 2016, the Company recorded net realized losschange in fair value of $0.2 million andthese contracts recognized directly in earnings as a net realized gaincomponent of $1.2 million, respectively, from settling forward foreign currency contracts and unrealized gains of $1.5 million and $8.4 million, respectively, on the mark-to-market for its outstanding forward foreign currency contracts.other income (expense), net:
Three Months EndedNine Months Ended
June 27, 2020June 29, 2019June 27, 2020June 29, 2019
Amount of realized (loss) gain recognized in income
Forward foreign currency contracts$0.5  $3.0  $0.6  $6.5  
Foreign currency option contracts(0.5) —  (1.3) —  
Total$—  $3.0  $(0.7) $6.5  
Amount of unrealized (loss) gain recognized in income
Forward foreign currency contracts$(1.8) $(2.1) $(0.6) $(0.2) 
Foreign currency option contracts(0.2) —  (0.5) —  
Total$(2.0) $(2.1) $(1.1) $(0.2) 
As of December 30, 2017,June 27, 2020, the Company had outstanding forward foreign currency contracts that were not designated for hedge accounting and were used to hedge fluctuations in the U.S. dollar of forecasted transactions denominated in the Euro,

UK Pound, Australian dollar, Canadian Dollar, Chinese Yuan and Japanese Yen with an aggregate notional amount of $157.4$25.9 million. As of June 27, 2020, the Company had outstanding foreign currency option contracts that were not designated for hedge accounting and were used to hedge fluctuations in the U.S. dollar of forecasted transactions denominated in the Euro and UK Pound with a notional amount of $40.3 million.
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Financial Instrument Presentation
The table below presents the fair value of the Company's derivative financial instruments as well as their classification on the balance sheet as of December 30, 2017:
June 27, 2020:
Balance Sheet Location December 30, 2017 September 30, 2017Balance Sheet LocationJune 27, 2020September 28, 2019
Assets:    Assets:
Derivative instruments designated as a cash flow hedge:    Derivative instruments designated as a cash flow hedge:
Interest rate cap agreementsPrepaid expenses and other current assets $5.3
 $3.6
Interest rate cap agreementsPrepaid expenses and other current assets$—  $0.1  
Interest rate cap agreementsOther assets —
 1.2
Interest rate swap contractInterest rate swap contractOther assets—  4.7  
 $5.3
 $4.8
$—  $4.8  
    
Derivatives not designated as hedging instruments:    Derivatives not designated as hedging instruments:
Forward foreign currency contractsPrepaid expenses and other current assets $0.4
 $0.4
Forward foreign currency contractsPrepaid expenses and other current assets$0.2  $0.9  
Foreign currency option contractsForeign currency option contractsPrepaid expenses and other current assets0.1  2.0  
$0.3  $2.9  
    
Liabilities:    Liabilities:
Derivative instruments designated as a cash flow hedge:Derivative instruments designated as a cash flow hedge:
Interest rate swap contractInterest rate swap contractAccrued expenses$5.4  $—  
Interest rate swap contractInterest rate swap contractOther long-term liabilities23.6  —  
TotalTotal$29.0  $—  
Derivatives not designated as hedging instruments:    Derivatives not designated as hedging instruments:
Forward foreign currency contractsAccrued expenses $2.6
 $4.0
Forward foreign currency contractsAccrued expenses$0.1  $0.1  
The following table presents the unrealized gain (loss) recognized in AOCI related to the interest rate caps and interest rate swap for the following reporting periods:
Three Months EndedNine Months Ended
Three Months EndedJune 27, 2020June 29, 2019June 27, 2020June 29, 2019
December 30, 2017 December 31, 2016
Amount of gain (loss) recognized in other comprehensive income, net of taxes:   
Amount of loss recognized in other comprehensive income, net of taxes:Amount of loss recognized in other comprehensive income, net of taxes:
Interest rate swapInterest rate swap$(4.6) $—  $(25.4) $—  
Interest rate cap agreements$(4.3) $0.7
Interest rate cap agreements(0.1) (2.1) (0.5) (7.5) 
TotalTotal$(4.7) $(2.1) $(25.9) $(7.5) 
The following table presents the adjustment to fair value (realized and unrealized) recorded within the Consolidated Statements of IncomeOperations for derivative instruments for which the Company did not elect hedge accounting:
Derivatives not classified as hedging instrumentsAmount of (Loss) Gain Recognized in Income
Three Months Ended June 27, 2020Three Months Ended June 29, 2019Nine Months Ended June 27, 2020Nine Months Ended June 29, 2019
Forward foreign currency contracts$(1.3) $0.9  $—  $6.3  
Foreign currency option contracts(0.8) —  (1.9) —  
Total$(2.1) $0.9  $(1.9) $6.3  
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Derivatives not classified as hedging instruments Amount of Gain (Loss) Recognized in IncomeLocation of Gain (Loss) Recognized in Income
  Three Months Ended December 30, 2017 Three Months Ended December 31, 2016 
Forward foreign currency contracts $1.2
 $9.6
Other income, net


(7)(9) Commitments and Contingencies
Litigation and Related Matters

On June 9, 2010, Smith & Nephew, Inc. ("Smith & Nephew")November 6, 2015, the Company filed a suit against Interlace Medical,Minerva Surgical, Inc. ("Interlace"(“Minerva”), which the Company acquired on January 6, 2011, in the United States District Court for the District of Massachusetts. The complaint allegedDelaware, alleging that the Interlace MyoSure hysteroscopic tissue removalMinerva’s endometrial ablation device infringedinfringes U.S. patent 7,226,459Patent 6,872,183 (the '459'183 patent), U.S. Patent 8,998,898 and U.S. Patent 9,095,348 (the '348 patent). On November 22, 2011, Smith & NephewJanuary 25, 2016, the Company amended the complaint to include claims against Minerva for unfair competition, deceptive trade practices and tortious interference with business relationships. On February 5, 2016, the Company filed suita second amended complaint to additionally allege that Minerva’s endometrial ablation device infringes U.S. Patent 9,247,989 (the '989 patent). On March 4, 2016, Minerva filed an answer and counterclaims against the Company, in the United States District Court for the District of Massachusetts. The complaint alleged that use of the MyoSure tissue removal system infringed U.S. patent 8,061,359 (the '359 patent). Both complaints sought preliminary and permanent injunctive relief and unspecified damages. On

September 4, 2012, following a two week trial, the jury returned a verdict of infringement of both the '459 and '359 patents and assessed damages of $4.0 million. A two-day bench trial regardingseeking declaratory judgment on the Company’s assertionclaims and asserting claims against the Company for unfair competition, deceptive trade practices, interference with contractual relationships, breach of inequitable conduct on the part of Smith & Nephew with regard to the '359 patent began on December 10, 2012contract and oral arguments on the issue of inequitable conduct were presented on February 27, 2013.trade libel. On June 27, 2013,2, 2016, the Court denied the Company’s motionsmotion for a preliminary injunction on its patent claims and denied Minerva’s request for preliminary injunction related to inequitable conductthe Company’s alleged false and allowed Smith & Nephew’s request for injunction, but ordered that enforcement ofdeceptive statements regarding the injunction be stayed until final resolution, including appeal, ofMinerva product. On June 28, 2018, the current re-examinations of both patents atCourt granted the United States PatentCompany's summary judgment motions on infringement and Trademark Office (“USPTO”). The Court also rejected the jury’s damage award and ordered the parties to identify a mechanism for resolving the damages issue. The USPTO issued final decisions that the claims of the '459 and the '359 patents asserted as part of the litigation are not patentable, which decisions Smith & Nephew appealed to the U.S. Patent Trial and Appeal Board ("PTAB"). In 2016, the PTAB (i) affirmed the USPTO decisionno invalidity with respect to the '459 patent, holding‘183 and ‘348 patents. The Court also granted the Company’s motion for summary judgment on assignor estoppel, which bars Minerva’s invalidity defenses or any reliance on collateral findings regarding invalidity from inter partes review proceedings. The Court also denied all of Minerva’s defenses, including its motions for summary judgment on invalidity, non-infringement, no willfulness, and no unfair competition.On July 27, 2018, after a two-week trial, a jury returned a verdict that: (1) awarded the Company $4.8 million in damages for Minerva’s infringement; (2) found that Minerva’s infringement was not willful; and (3) found for the claimsCompany regarding Minerva’s counterclaims. Damages continued to accrue as Minerva continues its infringing conduct. On May 2, 2019, the Court issued rulings that denied the parties' post-trial motions, including the Company's motion for a permanent injunction seeking to prohibit Minerva from selling infringing devices. Both parties appealed the Court's rulings regarding the post-trial motions. On March 4, 2016, Minerva filed 2 petitions at issue are invalid, and (ii) reversed the USPTO for inter partes review of the '348 patent. On September 12, 2016, the PTAB declined both petitions to review patentability of the '348 patent. On April 11, 2016, Minerva filed a petition for inter partes review of the '183 patent. On October 6, 2016, the PTAB granted the petition and instituted a review of the '183 patent. On December 15, 2017, the PTAB issued a final written decision with respectinvalidating all claims of the ‘183 patent. On February 9, 2018 the Company appealed this decision to the '359 patent, holding that the claims at issue are not invalid. The Company and Smith & Nephew have appealed the decisions by the Patent Trial and Appeal Board on the '359 patent and the '459 patent, respectively, to the U.S.United States Court of Appeals for the Federal Circuit ("Court of Appeals"). Briefing on both appeals is completed. Oral arguments were held in the '459 patent appeal on October 24, 2017 and in the '359 patent appeal on December 7, 2017. On January 30, 2018,April 19, 2019, the Court of Appeals issued aaffirmed the PTAB's final written decision regarding the '183 patent. On July 16, 2019, the Court of Appeals denied the Company’s petition for rehearing in the '459 patent appeal that affirmed-in-part and reversed-in-partregarding the PTAB'183 patent. On April 22, 2020, the Court of Appeals affirmed the district court’s summary judgment ruling and remanded the matter to the PTAB for further proceedings. At this time, based on available information regarding this litigation,in favor of the Company is unable to reasonably assessof no invalidity and infringement, and summary judgment that assignor estoppel bars Minerva from challenging the ultimate outcomevalidity of this casethe ‘348 patent. The Court of Appeals also denied the Company’s motion for a permanent injunction and ongoing royalties for infringement of the ‘183 patent. The Court of Appeals denied Minerva’s arguments for no damages or, determine an estimate, oralternatively, a rangenew trial. On May 22, 2020 both parties petitioned for en banc review of estimates,the Court of potential losses.Appeals decision. On July 22, 2020, the Court of Appeals denied both parties' petitions for en banc review.

On April 11, 2017, Minerva Surgical, Inc. (“Minerva”) filed suit against the Company and Cytyc Surgical Products, LLC (“Cytyc”) in the United States District Court for the Northern District of California alleging that the Company’s and Cytyc’s NovaSure ADVANCED endometrial ablation device infringes Minerva’s U.S. patent 9,186,208. Minerva is seeking a preliminary and permanent injunction against the Company and Cytyc from selling this NovaSure device as well as enhanced damages and interest, including in lost profits, price erosion and/or royalty. On January 5, 2018, the Court denied Minerva's motion for a preliminary injunction. On February 2, 2018, at the parties’ joint request, this action was transferred to the District of Delaware. On March 26, 2019, the Magistrate Judge issued a claims construction ruling regarding the disputed terms in the patent, which the District Court Judge adopted in all respects on October 21, 2019. The original trial date of July 20, 2020 was vacated. The next joint status report is due on September 25, 2020. At this time, based on available information regarding this litigation, the Company is unable to reasonably assess the ultimate outcome of this case or determine an estimate, or a range of estimates, of potential losses.

In January 2012, Enzo Life Sciences, Inc. ("Enzo") filed suit against the Company's subsidiary, Gen-Probe Incorporated ("Gen-Probe"), in the United States District Court for the District of Delaware, alleging that certain of Gen-Probe’s diagnostics products, including products that incorporate Gen-Probe’s hybridization protection assay technology (HPA), which include the Aptima line of products, infringe Enzo’s U.S. patent 6,992,180 (the '180 patent). On March 6, 2012, Enzo filed suit against the Company in the United States District Court for the District of Delaware, alleging that products based on the Company's Invader chemistry platform, such as Cervista HPV HR and Cervista HPV 16/18, infringe the '180 patent. On July 16, 2012, Enzo amended its complaint to include additional products that include HPA or TaqMan reagent chemistry, including the Progensa, AccuProbe and Prodesse product lines. The Company counter-claimed for non-infringement, invalidity and unenforceability of the '180 patent. On September 30, 2013, Enzo filed its infringement contentions which added products including "Torch" probes (e.g., MilliPROBE Real-Time Detection System for Mycoplasma), PACE and certain Procleix assays. Both complaints sought preliminary and permanent injunctive relief and unspecified damages. Summary judgment and Daubert motions were filed by the parties on December 15, 2016. A hearing on the summary judgment motions was held on April 4, 2017, and on June 28, 2017, the Court ruled that the '180 patent is invalid for nonenablement. Final judgment was entered on July 19, 2017, and on August 18, 2017, Enzo filed a notice of appeal with the Court of Appeals for the Federal Circuit. Enzo’s opening appeal brief was filed on November 28, 2017, and the Company’s responsive brief is due March 8, 2018. At this time, based on available information regarding this litigation, the Company is unable to reasonably assess the ultimate outcome of this case or determine an estimate, or a range of estimates, of potential losses.

On March 27, 2015, Enzo filed an additional suit against the Company in the United States District Court for the District of Delaware. The complaint alleges that certain additional Company molecular diagnostic products, including, inter alia, the Procleix Parvo/HAV assays and coagulation products, including the Invader Factor II test and the Invader Factor V test, also infringe the '180 patent. The complaint further alleged that certain of the Company’s molecular diagnostic products, including the Company’s Progensa PCA3, Aptima and Procleix products using target capture technology infringe Enzo’s U. S. Patent 7,064,197 (the '197 patent). On June 11, 2015, this matter was stayed pending the resolution of summary judgment motions in the other related suits involving the '197 patent. The litigation remains stayed. On March 30, 2016, Hologic filed two requests for inter partes review of the ‘197 patent at the USPTO. The USPTO instituted the two inter partes reviews on all challenged claims on October 4, 2016. Combined oral arguments for the two inter partes reviews were held on June 1, 2017. On September 28 and October 2, 2017, the PTAB issued final written decisions in the two inter partes reviews finding that all of the challenged claims of the ‘197 patent are unpatentable. In response to the final written decisions, Enzo filed notices of appeal on November 29, 2017, and the United States Court of Appeals for the Federal Circuit consolidated Enzo’s appeals on December 14, 2017. Enzo’s opening brief is due March 12, 2018. At this time, based on available information regarding this

litigation and the related inter partes reviews, the Company is unable to reasonably assess the ultimate outcome of this case or determine an estimate, or a range of estimates, of potential losses.

On October 3, 2016, Enzo filed an additional suit against the Company in the United States District Court for the District of Delaware. The complaint alleges that all of the Company's Progensa PCA3, Aptima and Procleix products infringe U.S. Patent 6,221,581 (the '581 patent). On November 28, 2016, the Company filed an answer and counterclaims of non-infringement, invalidity and unenforceability. On June 30, 2017, Hologic filed its initial invalidity contentions, which provide support for finding that the asserted claims of the '581 patent are invalid based on anticipation, obviousness, lack of adequate written description and enablement, and indefiniteness. On August 31, 2017, the Company and Enzo filed supplemental invalidity charts and supplemental infringement charts, respectively. The parties filed their proposed claim constructions on September 28, 2017. The parties’ claim construction briefs are due in April 2018. On October 4, 2017, the Company filed for inter partes review of the ‘581 patent with the USPTO based on Enzo’s asserted claims. Enzo filed its preliminary response on January 19, 2018. A decision on whether to institute inter partes review is expected in April 2018. At this time, based on available information regarding this litigation, the Company is unable to reasonably assess the ultimate outcome of this case or determine an estimate, or a range of estimates, of potential losses.

On February 3, 2017, bioMérieux, S.A. and bioMérieux, Inc. (collectively “bioMérieux”) filed suit against the Company in the United States District Court for the Middle District of North Carolina. The complaint allegedCarolina ("MDNC"), alleging that the Company’s Aptima HIV-1 RNA Qualitative assay and Aptima HIV-1 Quant Dx assay, as well asHIV products, including blood screening products previously manufactured by the Company and sold to Grifols, S.A. andfor its former blood screening partner Grifols Diagnostic Solutions Inc. (“("Grifols USA”USA") for resale under the names Procleix HIV-1/HCV assay, Procleix Ultrio assay, and Procleix Ultrio Plus assay,, infringe U.S. Patent Nos. 8,697,352 and 9,074,262. On April 3, 2017, the Company and Grifols USA filed a Motion to dismiss asking the Court to dismiss the complaint in its entirety for bioMérieux’s failure to state a claim upon which relief can be granted. On June 9, 2017, Hologic and Grifols USA filed a supplemental motion to dismiss for improper venue. bioMérieux filed a response to the venue motion on June 30, 2017, and Hologic and Grifols USA responded by filing a brief in further support of their motion to dismiss for improper venue on July 14, 2017. On January 3, 2018, the district court judge for the Middle District of North CarolinaMDNC Court granted the parties’ consent motion to transfer the case to Delaware. At this time, basedOn June 11, 2019, the Court issued a claim construction ruling regarding the disputed terms in the patents. Motions for summary judgment were filed by the parties on available information regarding this litigation,September 30, 2019, and a hearing on these motions was held on December 18, 2019. A six-day trial concluded on February 25, 2020, with the jury finding that all claims of U.S. Patent No. 8,697,352 are invalid (U.S. Patent No. 9,074,262 was dropped from the case by bioMérieux prior to trial). On March 18, 2020, the parties agreed to a settlement under which bioMérieux
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agreed to dismiss all claims with prejudice and to waive the filing of post-trial motions and pursuing an appeal in exchange for a de minimis payment from the Company is unableand Grifols USA.

As described in Note 6, the Company has agreed to reasonably assess the ultimate outcome of this case or determine an estimate, or range of estimates, of potential losses.

On July 27, 2016, plaintiff ARcare, Inc., individually and as putative representative of a purported nationwide class, filed a complaint against Cynosure.  The plaintiff alleges that Cynosure violated the Telephone Consumer Protection Act by: (i) sending fax advertisements that did not comply with statutory and Federal Communications Commission requirements that senders provide recipients withindemnify CD&R for certain information about how to opt out from receiving faxed advertisements in the future; and (ii) sending unsolicited fax advertisements. The complaint sought damages, declaratory and injunctive relief, and attorneys’ fees on behalf of a purported class of all recipients of purported fax advertisements that the plaintiff alleges did not receive an adequate opt-out notice. On September 30, 2016, Cynosure answered the complaint and denied liability. On September 7, 2016, the plaintiff sent a demand letter seeking a class settlement for statutory damages under Massachusetts General Laws, Chapter 93A § 9 (“Chapter 93A”). On October 7, 2016, Cynosure responded denying any liability under Chapter 93A, but offering the plaintiff statutory damages of $25 on an individual basis. In March 2017, Cynosure and ARcare entered into a settlement agreement, subject to court approval, which requires Cynosure to pay settlement compensation of $8.5 million notwithstanding the number of claims filed. If approved, Cynosure would receive a full release from the settlement class concerning the conduct alleged in the complaint. As a result of the settlement agreement, Cynosure recorded a charge of $9.2 million, in the period ended December 31, 2016, which is still accrued on the Company's balance sheet as of December 30, 2017.

On March 17, 2017, a purported shareholder of Cynosure, Michael Guido, filed an action against Cynosure in the Court of Chancery of the State of Delaware pursuant to Section 220 of the Delaware General Corporation Law seeking the production of certain books and records, including books and recordslegal matters related to the acquisitionMedical Aesthetics business that existed at the date of Cynosure by Hologic.disposition. The action follows Cynosure’s rejectionCompany currently has $8.5 million accrued for such matters as of Mr. Guido’s demand for these books and records on the ground that he had not met the requirementsJune 27, 2020, but this amount could become greater if some or all of the statute. In addition to books and records, the complaint seeks reasonable attorneys’ fees. The Company filedcases which it is indemnifying have an answer to the complaint on April 10, 2017. At this time, based on available information regarding this matter, the Company is unable to reasonably assess the ultimate outcome of this case or determine an estimate, or range of estimates, of potential losses.adverse result.

The Company is a party to various other legal proceedings and claims arising out of the ordinary course of its business. The Company believes that except for those matters described above there are no other proceedings or claims pending against it the ultimate resolution of which could have a material adverse effect on its financial condition or results of operations. In all cases, at each reporting period, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under ASC 450, Contingencies. Contingencies. Legal costs are expensed as incurred.



(8)(10) Net Income Per Share
A reconciliation of basic and diluted share amounts is as follows:
 Three Months EndedNine Months Ended
 June 27,
2020		June 29,
2019		June 27,
2020		June 29,
2019
Basic weighted average common shares outstanding259,870  268,932  263,667  269,586  
Weighted average common stock equivalents from assumed exercise of stock options and issuance of stock units1,177  1,857  1,425  —  
Diluted weighted average common shares outstanding261,047  270,789  265,092  269,586  
Weighted-average anti-dilutive shares related to:
Outstanding stock options1,597  2,358  1,521  4,457  
Stock Units3  —  5  —  
 Three Months Ended
 December 30,
2017		 December 31,
2016
Basic weighted average common shares outstanding276,856
 278,663
Weighted average common stock equivalents from assumed exercise of stock options and stock units2,212
 3,143
Incremental shares from Convertible Notes premium1,734
 2,418
Diluted weighted average common shares outstanding280,802
 284,224
Weighted-average anti-dilutive shares related to:   
Outstanding stock options2,272
 1,442
Stock units216
 13
TheIn those reporting periods in which the Company has outstanding Convertible Notes, and the principal balance and any conversion premium may be satisfied, at the Company’s option, by issuingreported net income, anti-dilutive shares generally are comprised of commonthose stock cash or a combination of shares and cash. The Company's current policy isoptions that it will settle the principal balance of the Convertible Notes in cash. As such, the Company applies the treasury stock method to these securities and the dilution related to the conversion premium of the 2042 and 2043 Notes is included in the calculation of diluted weighted-average shares outstanding to the extent each issuance is dilutive based oneither have an exercise price above the average stock price during each reportingfor the period beingor the stock options’ combined exercise price and average unrecognized stock compensation expense upon exercise is greater than the conversion priceaverage stock price. In those reporting periods in which the Company has a net loss, anti-dilutive shares are comprised of the respective Notes.impact of those number of shares that would have been dilutive had the Company had net income plus the number of common stock equivalents that would be anti-dilutive had the company had net income.

(9)
(11) Stock-Based Compensation
The following presents stock-based compensation expense in the Company’s Consolidated Statements of Income:Operations:
Three Months Ended Three Months EndedNine Months Ended
December 30,
2017		 December 31,
2016		 June 27,
2020		June 29,
2019		June 27,
2020		June 29,
2019
Cost of revenues$2.2
 $2.8
Cost of revenues$1.4  $1.5  $5.2  $5.5  
Research and development2.5
 2.8
Research and development1.7  2.0  6.3  7.4  
Selling and marketing2.9
 2.7
Selling and marketing2.3  2.5  7.9  7.9  
General and administrative7.5
 10.9
General and administrative14.5  7.9  31.9  27.7  
Restructuring1.3
 —
Restructuring—  —  2.4  —  
$16.4
 $19.2
$19.9  $13.9  $53.7  $48.5  
The Company granted 1.6options to purchase 0.9 million and 0.91.0 million shares of the Company's common stock options during the threenine months ended December 30, 2017June 27, 2020 and December 31, 2016,June 29, 2019, respectively, with weighted-average exercise prices of $40.82$45.54 and $37.62,$41.28, respectively. There were 6.74.7 million options outstanding at December 30, 2017June 27, 2020 with a weighted-average exercise price of $31.20.$39.98.

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The Company uses a binomial model to determine the fair value of its stock options. The weighted-average assumptions utilized to value these stock options are indicated in the following table:
 
Three Months Ended Three Months EndedNine Months Ended
December 30,
2017		 December 31,
2016		 June 27,
2020		June 29,
2019		June 27,
2020		June 29,
2019
Risk-free interest rate2.1% 1.8%Risk-free interest rate1.7 %3.0 %1.7 %3.0 %
Expected volatility35.3% 36.6%Expected volatility33.6 %34.3 %33.6 %34.3 %
Expected life (in years)4.7
 4.7
Expected life (in years)4.84.84.84.8
Dividend yield—
 —
Dividend yield—  —  —  —  
Weighted average fair value of options granted$13.00
 $12.18
Weighted average fair value of options granted$9.90  $15.07  $13.79  $13.51  
The Company granted 0.8 million and 0.9 million restricted stock units (RSUs) during each of the threenine months ended December 30, 2017June 27, 2020 and December 31, 2016,June 29, 2019, respectively, with weighted-average grant date fair values of $40.79$45.67 and $37.58$41.15 per unit, respectively. As of December 30, 2017, there were 2.0 million unvested RSUs outstanding with a weighted-average grant date fair value of $37.72 per unit. In addition, the Company granted 0.40.1 million and 0.1 million performance stock units (PSUs) during the threenine months ended December 30, 2017June 27, 2020 and December 31, 2016,June 29, 2019, respectively, to members of its senior management team, which have a weighted-average grant date fair value of $40.86$45.38 and $37.64$40.97 per unit, respectively. Each recipient of PSUs is eligible to receive between zero0 and 200% of the target number of shares of the Company’s common stock at the end of three years provided the Company’s defined Return on Invested Capital metrics are achieved. The Company also granted 0.1 million of PSUs based on a one-year free cash flow measure (FCF) to its senior management team, which had a grant date fair value of $45.38. Each recipient of FCF PSUs is eligible to receive between zero and 200% of the target number of shares of the Company's common stock at the end of the one-year measurement period, but the FCF PSUs vest at the end of the three year service period. The Company is recognizing compensation expense for PSUs and FCF PSUs ratably over the required service period based on its estimate of the number of shares that will vest. If there is a change in the estimate of the number of shares that are probable of vesting, the Company will cumulatively adjustadjusts compensation expense in the period that the change in estimate is made. The Company also granted 0.30.1 million and 0.1 million market basedmarket-based awards (MSUs) to its senior management team during the threenine months ended December 30, 2017June 27, 2020 and December 31, 2016,June 29, 2019, respectively. Each recipient of MSUs is eligible to receive between zero0 and 200% of the target number of shares of the Company’s common stock at the end of three years based upon achieving a certain total shareholder return relative to a defined peer group. The MSUs were valued at $49.45$43.54 and $48.90$55.13 per share using the Monte Carlo simulation model. The Company is recognizing compensation expense for the MSUs ratably over the service period. At June 27, 2020, there was 2.5 million in aggregate RSUs, PSUs, FCF PSUs and MSUs outstanding.
At December 30, 2017,June 27, 2020, there was $37.0$23.2 million and $98.4$66.9 million of unrecognized compensation expense related to stock options and stock units (comprised of RSUs, PSUs, FCF PSUs and PSUs)MSUs), respectively, to be recognized over a weighted-average period of 3.12.4 and 2.11.9 years, respectively.

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(10) Disposition
Table of Contents

Blood Screening Business

On December 14, 2016, the Company entered into a definitive agreement to sell the assets of its blood screening business to its long-time commercial partner, Grifols for a sales price of $1.85 billion in cash, subject to adjustment based on an estimated closing amount of inventory. The divestiture was completed on January 31, 2017, and the Company received $1.865 billion. The sale resulted in a gain of $899.7 million recorded in the second quarter of fiscal 2017 within operations in the Consolidated Statements of Income. As a result of this disposition and proceeds received, the Company recorded a tax obligation of $649.5 million, which was paid in fiscal 2017. Upon the closing of the transaction, the Company's existing collaboration agreement with Grifols terminated, and a new collaboration agreement was executed as part of this transaction pursuant to which the Company provides certain research and development services to Grifols. In addition, the Company agreed to provide transition services to Grifols over the next two to three years depending on the nature of the respective service, including the manufacture of inventory. The Company also agreed to sell Panther instrumentation and certain supplies to Grifols as part of a long term supply agreement. In determining the accounting for the multiple elements of the overall arrangement, the Company allocated $13.1 million of the proceeds to these elements based on their estimated fair values.

The Company determined this disposal did not qualify to be reported as a discontinued operation as the blood screening business was deemed not to be strategic to the Company and has not had and will not have a major effect on the Company's operations and financial results. Under the previous collaboration agreement, the Company performed research and development activities and manufacturing, while Grifols performed the commercial and distribution activities. The blood screening business was embedded within the Company's molecular diagnostics business, and the Company retains ownership and will continue to use the intellectual property for the underlying technology of its molecular diagnostics assays and instrumentation.
Income from operations of the disposed business presented below represents the pretax profit of the business as it was operated prior to the date of disposition. The operating expenses include only those that were incurred directly by and were retained by the disposed business and are now incurred by Grifols. As noted above, the Company is performing a number of transition services and the financial impact from these services are not included in income from operations presented below. The Company is in effect serving as a contract manufacturer of assays for Grifols for a two to three year period from the date of disposal. Revenue and income from operations of the disposed business for the three month period ended December 31, 2016 was $65.2 million and $28.6 million, respectively. Under the long term supply agreement, transition services agreement to manufacture assays and research and development services, the Company recorded revenue of $12.6 million for the three months ended December 30, 2017.


(11)(12) Other Balance Sheet Information

June 27,
2020		September 28,
2019
Inventories
Raw materials$165.6  $166.1  
Work-in-process56.5  54.5  
Finished goods191.5  224.3  
$413.6  $444.9  
Property, plant and equipment
Equipment$425.6  $379.2  
Equipment under customer usage agreements458.2  435.5  
Building and improvements164.6  196.7  
Leasehold improvements43.7  61.7  
Land40.6  46.3  
Furniture and fixtures15.9  17.5  
1,148.6  1,136.9  
Less – accumulated depreciation and amortization(692.4) (666.0) 
$456.2  $470.9  

 December 30,
2017		 September 30,
2017
Inventories   
Raw materials$114.2
 $95.7
Work-in-process44.6
 45.0
Finished goods199.4
 190.9
 $358.2
 $331.6
Property, plant and equipment   
Equipment$363.7
 $357.9
Equipment under customer usage agreements379.0
 368.7
Building and improvements172.7
 172.0
Leasehold improvements61.1
 60.6
Land46.4
 46.3
Furniture and fixtures21.0
 20.8
 1,043.9
 1,026.3
Less – accumulated depreciation and amortization(576.8) (553.5)
 $467.1
 $472.8
(12)(13) Business Segments and Geographic Information
TheDuring the first fiscal quarter of 2020 and fiscal 2019, the Company has fivehad 5 reportable segments: Diagnostics, Breast Health, GYN Surgical, Medical Aesthetics GYN Surgical and Skeletal Health. Certain reportable segments represent an aggregationThe Company completed the sale of its Medical Aesthetics business on December 30, 2019, but will continue to have operating units within each segment.expenses primarily related to indemnifying CD&R for legal and tax matters that existed as of the date of disposition. The Company measures and evaluates its reportable segments based on segment revenues and operating income adjusted to exclude the effect of non-cash charges, such as intangible asset amortization expense, intangible asset and goodwill impairment charges, acquisition related fair value adjustments and integration expenses, restructuring, divestiture and facility consolidation charges and other one-time or unusual items.

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Identifiable assets for the five principal operatingreportable segments consist of inventories, intangible assets, goodwill, and property, plant and equipment. The Company fully allocates depreciation expense to its five reportable segments. The Company has presented all other identifiable assets as corporate assets. There were no0 inter-segment revenues during the three and nine months ended December 30, 2017June 27, 2020 and December 31, 2016.June 29, 2019. Segment information is as follows:
Three Months Ended Three Months EndedNine Months Ended
December 30,
2017		 December 31,
2016		 June 27,
2020		June 29,
2019		June 27,
2020		June 29,
2019
Total revenues:   Total revenues:
Diagnostics$284.6
 $325.4
Diagnostics$532.2  $305.4  $1,163.2  $898.6  
Breast Health288.0
 273.3
Breast Health224.0  325.4  862.8  971.6  
GYN SurgicalGYN Surgical51.5  112.2  275.9  322.8  
Medical Aesthetics91.3
 —
Medical Aesthetics—  85.0  65.3  238.6  
GYN Surgical107.5
 114.8
Skeletal Health19.7
 20.9
Skeletal Health15.2  24.4  62.3  69.8  
$791.1

$734.4
$822.9  $852.4  $2,429.5  $2,501.4  
Income (loss) from operations:   Income (loss) from operations:
Diagnostics$36.5
 $41.1
Diagnostics$233.9  $45.7  $340.7  $120.1  
Breast Health89.7
 85.2
Breast Health(11.1) 97.5  158.6  294.3  
GYN SurgicalGYN Surgical(23.4) 22.5  32.0  70.0  
Medical Aesthetics(23.0) —
Medical Aesthetics(1.0) (18.6) (54.3) (517.6) 
GYN Surgical30.2
 25.5
Skeletal Health0.7
 (5.8)Skeletal Health(7.4) (1.8) (4.8) (4.1) 
$134.1

$146.0
$191.0  $145.3  $472.2  $(37.3) 
Depreciation and amortization:   Depreciation and amortization:
Diagnostics$64.7
 $84.9
Diagnostics$59.4  $61.6  $177.8  $184.9  
Breast Health4.9
 5.1
Breast Health13.0  9.3  36.2  27.5  
GYN SurgicalGYN Surgical21.0  21.9  63.1  65.8  
Medical Aesthetics28.5
 —
Medical Aesthetics—  20.4  4.1  71.0  
GYN Surgical22.9
 25.1
Skeletal Health0.2
 0.2
Skeletal Health0.2  0.1  0.5  0.5  
$121.2

$115.3
$93.6  $113.3  $281.7  $349.7  
Capital expenditures:   Capital expenditures:
Diagnostics$11.9
 $10.3
Diagnostics$28.4  $14.2  $63.7  $44.7  
Breast Health3.5
 2.2
Breast Health3.0  3.0  17.5  9.7  
GYN SurgicalGYN Surgical2.4  4.3  12.9  10.9  
Medical Aesthetics1.6
 —
Medical Aesthetics—  1.2  1.4  5.7  
GYN Surgical2.4
 4.1
Skeletal Health0.7
 0.3
Skeletal Health0.1  0.4  0.3  1.0  
Corporate1.7
 7.8
Corporate1.1  2.7  2.2  5.7  
$21.8

$24.7
$35.0  $25.8  $98.0  $77.7  
 
June 27,
2020		September 28,
2019
Identifiable assets:
Diagnostics$2,169.0  $2,276.6  
Breast Health1,225.8  1,127.8  
GYN Surgical1,271.6  1,328.6  
Medical Aesthetics—  159.3  
Skeletal Health32.4  27.3  
Corporate2,104.3  1,522.5  
$6,803.1  $6,442.1  
31
��December 30,
2017		 September 30,
2017
Identifiable assets:   
Diagnostics$2,583.0
 $2,621.6
Breast Health840.5
 824.0
Medical Aesthetics1,723.9
 1,751.2
GYN Surgical1,477.8
 1,494.6
Skeletal Health26.8
 25.5
Corporate1,396.3
 1,262.7
 $8,048.3
 $7,979.6
Table of Contents

The Company had no customers that represented greater than 10% of consolidated revenues during the three and nine months ended December 30, 2017June 27, 2020 and December 31, 2016.June 29, 2019.
The Company operates in the following major geographic areas as noted in the below chart. Revenue data is based upon customer location. Other than the United States, no single country accounted for more than 10% of consolidated revenues. The Company’s sales in Europe are predominantly derived from France, Germany and the United Kingdom. The Company’s sales in Asia-Pacific are predominantly derived from China, Australia and Japan. The “Rest of World” designation includes Canada, Latin America and the Middle East.
Revenues by geography as a percentage of total revenues were as follows:
 
 Three Months EndedNine Months Ended
 June 27,
2020		June 29,
2019		June 27,
2020		June 29,
2019
United States80.3 %75.4 %76.9 %75.1 %
Europe12.4 %11.3 %13.3 %12.0 %
Asia-Pacific5.3 %8.9 %6.4 %8.4 %
Rest of World2.0 %4.4 %3.4 %4.5 %
100.0 %100.0 %100.0 %100.0 %

 Three Months Ended
 December 30,
2017		 December 31,
2016
United States75.5% 77.9%
Europe11.5% 10.7%
Asia-Pacific8.7% 8.4%
Rest of World4.3% 3.0%
 100.0% 100.0%

(13)(14) Income Taxes

In accordance with ASC 740, Income Taxes (ASC 740), each interim period is considered integral to the annual period, and tax expense is measured using an estimated annual effective tax rate. An entity is required to record income tax expense each quarter based on its annual effective tax rate estimated for the full fiscal year and use that rate to provide for income taxes on a current year-to-date basis, adjusted for discrete taxable events that occur during the interim period.

The Company’s effective tax rate for the three and nine months ended December 30, 2017June 27, 2020 was (324.5)%a provision of 19.0% and a benefit of 60.3%, respectively, compared to 25.5%a provision of 17.8% and a benefit of 40.7%, respectively, for the corresponding periodperiods in the prior year.

The benefit recorded in the current quarter is primarily due to the impact of the Tax Cuts and Jobs Act (the "Act") enacted on December 22, 2017. As a result of this law, US corporations are subject to lower income tax rates, and the Company is required to remeasure its US net deferred tax liabilities at a lower rate, resulting in a net benefit of $355.2 million recorded in the provision for income taxes. Partially offsetting this benefit, the Company recorded a charge of $26.0 million for transition taxes related to the deemed repatriation of foreign earnings. For the current quarter, in addition to the items noted, the effective tax rate was lower thanfor the three months ended June 27, 2020 differed from the U.S. statutory tax rate primarily due to the geographic mix of income earned by our international subsidiaries which are taxed at rates lower than the U.S. statutory tax rate, the impact of the U.S. deduction for foreign derived intangible income, and reserve releases resulting from statute of limitations expirations, partially offset by the global intangible low-taxed income inclusion, and unbenefited foreign losses. The effective tax rate for the nine months ended June 27, 2020 differed from the U.S. statutory tax rate primarily due to a $312.8 million discrete net tax benefit related to the loss on the sale of the Medical Aesthetics business.

For the three months ended June 29, 2019, the effective tax rate differed from the U.S. statutory tax rate primarily due to reserve releases resulting from statute of limitations expirations and favorable audit settlements, and earnings in jurisdictions subject to lower tax rates. For the nine months ended June 29, 2019, the effective tax rate differed from the U.S. statutory tax rate primarily due to the effect of the Medical Aesthetics impairment charge recorded in the second quarter of fiscal 2019, earnings in jurisdictions subject to lower tax rates, a $19.2 million discrete benefit related to an internal restructuring, reserve releases resulting from statute of limitations expirations and favorable audit settlements, and finalizing the domestic production activities deduction benefit. For the three months ended December 31, 2016, the effective tax rate was lower than the statutory tax rate primarily due to the tax benefit from restricted stock units upon vesting, earnings in jurisdictions subject to lower tax rates, and the domestic production activities deduction benefit.

US Tax Reform
The Act reduces the US federal corporate income tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, and creates new taxes on certain foreign sourced earnings.
At December 30, 2017, the Company has not completed its accounting for the tax effects of enactmentimpact of the Act; however, as described below, the Company has made a reasonable estimate of the effects on its existing deferred tax balances and the one-time transition tax, and recognized a provisional net benefit of $329.2 million, which is included in income tax expense.

On December 22, 2017, the SEC issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implicationsenactment of the Tax Cuts and Jobs Act (“SAB 118”) directing SEC registrantsin the first quarter of fiscal 2019.

During the nine months ended June 27, 2020, the Company's gross unrecognized tax benefits excluding interest increased from $101.6 million to consider$200.3 million primarily as a result of uncertain tax positions related to the impactdivestiture of the US legislationMedical Aesthetics business, and to a lesser extent intercompany transfer pricing related to ordinary business operations, partially offset by reserve releases resulting from statute of limitations expirations.

Other Tax Accounting Pronouncements

On October 24, 2016, the FASB issued ASU 2016-16, which removes the prohibition in ASC 740 against the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory. Under ASU 2016-16, the selling (transferring) entity is required to recognize a current tax expense or benefit upon transfer of the asset.
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Similarly, the purchasing (receiving) entity is required to recognize a deferred tax asset or deferred tax liability, as “provisional” when it does not havewell as the necessary information available, preparedrelated deferred tax benefit or analyzed (including computations)expense, upon receipt of the asset.

This ASU is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. The Company adopted ASU 2016-16 in reasonable detailthe first quarter of fiscal 2019 on a modified retrospective basis through a cumulative-effect adjustment to complete its accounting fordecrease the opening balance of accumulated deficit within stockholders' equity as of September 30, 2018, the first day of fiscal 2019. This change in accounting principle resulted in an increase in deferred tax law. In accordance with SAB 118, the additional estimated net income tax benefitassets of $329.2$2.9 million, represents the Company’s best estimate based on its interpretationa decrease in accumulated deficit of the US legislation$2.5 million, and a decrease in prepaid taxes of $0.4 million as the Company is still accumulating data to finalize the underlying calculations, or in certain cases, the US Treasury is expected to issue further guidance on the application of certain provisions of the US legislation.


In the three months ended December 30, 2017, the Company revised its estimated annual effective rate to reflect a change in the federal statutory income tax rate from 35% to 21%. The rate change is administratively effective at the beginning of the Company’s fiscal year using a blended rate forbeginning September 30, 2018.

Under ASU 2016-16 the annual period. The Company's blended statutory income tax rate for fiscal 2018 is 24.5%.

Deferred tax assets and liabilities: The Company re-measured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is 24.5% for fiscal 2018 reversals and 21% for post-fiscal 2018 reversals. However, the Company is still analyzing certain aspects of the Act and refining its calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. The provisional net benefit amount recorded related to the re-measurement of the Company’s deferred tax balance was $355.2 million.

Foreign tax effects: The one-time transition tax is based on the Company’s total post-1986 earnings and profits (E&P) which were previously deferred from US income taxes. The Company recorded a provisional amount for its one-time transition tax liability related$29.5 million increase to the deemed repatriation of the earnings of its foreign subsidiaries, resulting in an increase in income tax expense and income tax liabilities and a decrease of $26.0 million. The Company has not yet finalized its calculation of the total post-1986 foreign E&P for these foreign subsidiaries. Further, the transition tax is based in part on the amount of those earnings held in cash and other specified assets. This amount may change when the Company finalizes the calculation of its post-1986 foreign E&P previously deferred from US federal taxation and finalizes the amounts held in cash or other specified assets. No additional income taxes have been provided for any remaining undistributed foreign earnings not subject$48.7 million to the transition tax and any additional outside basis difference inherent in these entities as these amounts continue to be indefinitely reinvested in foreign operations. The Company continues to evaluate this assertion in its ongoing analysis of the effects of tax reform on the Company's strategic initiatives. The Company believes that determining the amount of unrecognized deferred tax liabilityexpense and net deferred tax liabilities for the nine months ended June 29, 2019 related to any remaining undistributed foreignintercompany transactions which involved intra-entity transfers of assets other than inventory. The net result was an increase to net income of $19.2 million, or an earnings not subject to the transition tax and additional outside basis difference in these entities (i.e., basis difference in excessper share increase of that subject to the one time transition tax) is not practicable.$0.07.


Further, starting in fiscal 2019, the Act subjects a US shareholder of a controlled foreign corporation to current tax on “global intangible low-taxed income” (GILTI) and establishes a tax on certain payments from corporations subject to US tax to related foreign persons, also referred to as base erosion and anti-abuse tax (BEAT).

Because of the complexity of the new international tax provisions not applicable to the Company until fiscal 2019, the Company is continuing to evaluate these provisions of the Act and the application of ASC 740.

Non-Income Tax Matters


The Company is subject to tax examinations for value added, sales-based, payroll, and other non-income tax items. A number of these examinations are ongoing in various jurisdictions. The Company takes certain non-income tax positions in the jurisdictions in which it operates pursuant to ASC 450. In the normal course of business, the Company's positions and conclusions related to its non-income tax positions could be challenged, resulting in assessments by governmental authorities.

In January 2018, While the Company settled anbelieves estimated losses previously recorded are reasonable, certain audits are still ongoing state tax audit for approximately $11.0 million, resulting in a reversal of $4.0 millionand additional charges could be recorded to general and administrative expenses in the first quarter of fiscal 2018.future.



(14)(15) Intangible Assets and Goodwill
Intangible assets consisted of the following:
 
DescriptionAs of June 27, 2020As of September 28, 2019
Gross
Carrying
Value		Accumulated
Amortization		Gross
Carrying
Value		Accumulated
Amortization
Acquired intangible assets:
Developed technology$3,925.4  $2,842.8  $3,927.7  $2,654.8  
Customer relationships547.0  468.9  525.5  447.5  
Trade names244.1  178.6  245.4  171.1  
Distribution agreement—  —  2.5  —  
Non-competition agreements1.5  1.2  1.4  0.9  
Business licenses2.3  2.2  2.3  2.2  
Total acquired intangible assets$4,720.3  $3,493.7  $4,704.8  $3,276.5  
Internal-use software51.7  42.7  53.9  43.4  
Capitalized software embedded in products26.7  9.8  27.9  6.9  
Total intangible assets$4,798.7  $3,546.2  $4,786.6  $3,326.8  

In the first quarter of fiscal 2020, the Company's Medical Aesthetics business met the criteria to be designated as assets held-for-sale. As a result, the Company recorded a $30.2 million charge to record the asset group at fair value less costs to sell. In addition, developed technology, customer lists, trade names, and distribution agreement related to Medical Aesthetics of $24.1 million, $0.9 million, $2.0 million, and $1.2 million, respectively, were reclassified accordingly in the Company's Consolidated Balance Sheet to assets held-for-sale as of December 28, 2019 and subsequently disposed of in the second quarter of fiscal 2020.
        In the second quarter of fiscal 2020, the Company reviewed its long-lived assets for indicators of impairment as a result of lowering its expectations for revenue and operating income in the short term from the impact of COVID-19 on its business as discussed in Note 1. The Company updated its long-term forecasts and performed an undiscounted cash flow
33
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DescriptionAs of December 30, 2017 As of September 30, 2017
Gross
Carrying
Value
 
Accumulated
Amortization
 
Gross
Carrying
Value
 
Accumulated
Amortization
Acquired intangible assets:       
Developed technology$4,528.8
 $2,266.7
 $4,528.7
 $2,186.8
In-process research and development46.0
 —
 46.0
 —
Customer relationships556.7
 402.8
 552.8
 393.8
Trade names310.3
 161.1
 310.3
 156.4
Distribution agreement42.0
 4.1
 42.0
 2.8
Non-competition agreements1.5
 0.1
 1.5
 0.1
Business licenses2.5
 2.2
 2.4
 2.2
Total acquired intangible assets$5,487.8
 $2,837.0
 $5,483.7
 $2,742.1
        
Internal-use software65.8
 48.2
 64.5
 46.1
Capitalized software embedded in products15.5
 2.6
 14.3
 2.0
Total intangible assets$5,569.1

$2,887.8

$5,562.5

$2,790.2
analysis which indicated that the estimated future cash flows were sufficient to recover the carrying values of its asset groups. In addition, the Company had significant cushion from its most recent goodwill impairment test in each of its reporting units and believes, based on its procedures, current facts and expectations, that it is more likely than not that the fair value of each of its reporting units is above their respective carrying values. The Company's conclusion did not change in the third quarter of fiscal 2020. Given the current uncertainty of the duration and scope of the COVID-19 pandemic, the related economic impact, and the potential longer term impact on the Company's business, financial condition and results of operations, in the future the Company may be required to perform an interim impairment test, in addition to its annual test, and record an impairment charge.
Medical Aesthetics Impairment - Fiscal 2019

During the second quarter of fiscal 2019, in connection with commencing its company-wide annual budgeting and strategic planning process as well as evaluating the current operating performance of its Medical Aesthetics reporting unit (comprised solely of the Cynosure business), the Company reduced its short term and long term revenue and operating income forecasts. The updated forecast reflected reduced volume and market penetration projections primarily in the Body Contouring business due to increased competition in the non-invasive fat reduction category, and lower Women's Health product sales primarily from reduced sales volume of the MonaLisa Touch device, which the Company believed was primarily driven by the FDA's public letter in the fourth quarter of fiscal 2018 challenging various medical aesthetics companies marketing of devices for so called "vaginal rejuvenation" procedures relative to their FDA approvals. As a result of the revised forecasts in the second quarter of fiscal 2019, the Company determined indicators of impairment existed and performed an undiscounted cash flow analysis pursuant to ASC 360, Property, Plant, and Equipment - Overall, to determine if the cash flows expected to be generated by this asset group over the estimated remaining useful life of the primary assets were sufficient to recover the carrying value of the asset group, which was determined to be at the reporting unit level. Based on this analysis, which included evaluating various cash flow scenarios, the undiscounted cash flows were not sufficient to recover the carrying value of the asset group. As a result, the Company was required to perform Step 3 of the impairment test and determine the fair value of the asset group. To estimate the fair value, the Company utilized the income approach, which is based on a discounted cash flow (DCF) analysis and calculates the fair value by estimating the after-tax cash flows attributable to the asset group and then discounting the after-tax cash flows to present value using a risk-adjusted discount rate. Assumptions used in the DCF require significant judgment, including the appropriate discount rates and terminal values, growth rates, and the amount and timing of expected future cash flows. The forecasted cash flows were based on the Company's most recent strategic plan as of the measurement date and for periods beyond the strategic plan, the Company's estimates were based on assumed growth rates expected as of the measurement date. The Company believed its assumptions were consistent with the plans and estimates that a market participant would use to manage the business. The discount rate used is intended to reflect the risks inherent in future cash flow projections and was based on an estimate of the weighted average cost of capital (WACC) of market participants relative to the asset group. The Company used a discount rate of 11.0%. As a result of this analysis, the fair value of the Medical Aesthetics asset group was below its carrying value, and the Company recorded an impairment charge of $443.8 million during the second quarter of fiscal 2019. The impairment charge was allocated to the long-lived assets as follows: $373.3 million to developed technology, $14.4 million to customer relationships, $31.5 million to trade names, $17.8 million to distribution agreements and $6.8 million to equipment. The Company believed its assumptions used to determine the fair value of the asset group were reasonable. The Company completed the sale of the Medical Aesthetics business in the second quarter of fiscal 2020. Please refer to Note 6 for additional details.
The estimated remaining amortization expense of the Company's acquired intangible assets as of December 30, 2017June 27, 2020 for each of the five succeeding fiscal years is as follows:
Remainder of Fiscal 2020$72.8 
Fiscal 2021$270.2 
Fiscal 2022$259.9 
Fiscal 2023$162.5 
Fiscal 2024$151.4 

Remainder of Fiscal 2018$283.1
Fiscal 2019$366.0
Fiscal 2020$354.8
Fiscal 2021$333.2
Fiscal 2022$320.3
The Company conducted its fiscal 2017 impairment test on the first day of the fourth quarter, and used a discounted cash flow method (DCF) to estimate the fair value of its reporting units as of July 2, 2017. The Company believes it used reasonable estimates and assumptions about future revenue, cost projections, cash flows, market multiples and discount rates as of the measurement date. As a result of completing Step 1, all of the Company's reporting units had fair values exceeding their carrying values, and as such, Step 2 of the impairment test was not required. However, one of its reporting units, Medical Aesthetics, had a fair value as of the measurement date that exceeded its carrying value by 2% with goodwill of $683.5 million. The Medical Aesthetics reporting unit is solely comprised of the Cynosure, Inc. business, which the Company acquired on March 22, 2017. In connection with the Company's annual strategic planning process and annual goodwill impairment test, it lowered its estimated financial projections for this business as a result of its then current operating performance being below expectations, which the Company primarily attributed to the significant turnover in the U.S. sales force in 2017 following the date of acquisition. The Company is continuing its efforts to rebuild the U.S. sales force and this continues to affect short term performance. The Company’s long-term outlook for the Medical Aesthetics business has not materially changed. The Company is continuing to monitor the operating performance of this reporting unit compared to the projections used in the annual impairment test, as well as current market and business conditions, to determine if an event has occurred or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. The Company has evaluated these factors and determined that no significant events occurred or circumstances changed during the period ended December 30, 2017 that would suggest it is more likely than not that the fair value of the reporting unit has declined below its carrying value. In the event the Company is unsuccessful in its efforts to rebuild the U.S. sales force or its efforts take significantly longer than expected, or other adverse conditions are identified, future operating performance may be below forecasted projections. If this occurs, the Company may need to revise its long-term growth rates or increase discount rates, and these factors could result in a decline in the fair value of the reporting unit and the Company may be required to record a goodwill impairment charge.

(15)(16) Product Warranties
Product warranty activity was as follows:
 
34
Table of Contents
 
Balance at
Beginning of
Period
 Provisions 
Settlements/
Adjustments
 
Balance at
End of Period
Three Months Ended:       
December 30, 2017$17.0
 $4.3
 $(5.1) $16.2
December 31, 2016$5.0
 $2.6
 $(1.7) $5.9
Balance at
Beginning of
Period		ProvisionsAcquiredDivestedSettlements/
Adjustments		Balance at
End of Period
Nine Months Ended:
June 27, 2020$13.9  $8.0  $0.5  $(6.1) $(7.2) $9.1  
June 29, 2019$15.9  $10.1  $—  $—  $(11.1) $14.9  
(16)
(17) Accumulated Other Comprehensive Loss


The following tables summarize the changes in accumulated balances of other comprehensive loss for the periods presented:

Three Months Ended June 27, 2020Nine Months Ended June 27, 2020
Foreign Currency TranslationPension PlansHedged Interest Rate CapsHedged Interest Rate SwapsTotalForeign Currency TranslationPension PlansHedged Interest Rate CapsHedged Interest Rate SwapsTotal
Beginning Balance$(38.5) $(1.7) $(1.1) $(17.6) $(58.9) $(41.4) $(1.7) $(2.7) $3.5  $(42.3) 
Other comprehensive income (loss) before reclassifications1.4  —  (0.1) (4.6) (3.3) 4.3  —  (0.2) (25.7) (21.6) 
Amounts reclassified to statement of income—  —  0.3  —  0.3  —  —  2.0  —  2.0  
Ending Balance$(37.1) $(1.7) $(0.9) $(22.2) $(61.9) $(37.1) $(1.7) $(0.9) $(22.2) $(61.9) 
Three Months Ended June 29, 2019Nine Months Ended June 29, 2019
Foreign Currency TranslationPension PlansHedged Interest Rate CapsTotalForeign Currency TranslationPension PlansHedged Interest Rate CapsTotal
Beginning Balance$(27.4) $(1.1) $(2.0) $(30.5) $(26.6) $(1.1) $2.2  $(25.5) 
Other comprehensive income (loss) before reclassifications(2.4) —  (2.1) (4.5) (3.2) —  (7.5) (10.7) 
Amounts reclassified to statement of income—  —  0.8  0.8  —  —  2.0  2.0  
Ending Balance$(29.8) $(1.1) $(3.3) $(34.2) $(29.8) $(1.1) $(3.3) $(34.2) 

(18) Restructuring Charges

Fiscal 2020 Actions

During the third quarter of fiscal 2020, the Company terminated certain positions across all divisions due to the continuing COVID-19 pandemic and associated economic disruptions. As a result, the Company recorded charges of $0.9 million in the third quarter of fiscal 2020. These charges were recorded pursuant to ASC 712, Compensation-Nonretirement Postemployment Benefits (ASC 712) or ASC 420 Exit or Disposal Cost Obligations (ASC 420) depending on the employee. No additional severance and benefits charges are expected under this action.

During the second and third quarter of fiscal 2020, the Company made various decisions to close certain manufacturing plant facilities, divest a certain business, and terminate certain personnel. The Company recorded charges totaling $0.1 million and $3.9 million in the three and nine months ended June 27, 2020, respectively related to these actions. The Company expects to record additional charges related to these actions totaling $1.8 million over the next twelve months.
35
 Three Months Ended December 30, 2017
 Foreign Currency Translation Marketable Securities Pension Plans Hedged Interest Rate Caps Total
Beginning Balance$(18.5) $(0.4) $(1.6) $4.3
 $(16.2)
Other comprehensive income (loss) before reclassifications5.5
 —
 0.6
 (4.3) 1.8
Amounts reclassified to statement of income—
 0.4
 —
 2.3
 2.7
Ending Balance$(13.0) $—
 $(1.0) $2.3
 $(11.7)

Table of Contents
 Three Months Ended December 31, 2016
 Foreign Currency Translation Marketable Securities Pension Plans Hedged Interest Rate Caps Total
Beginning Balance$(26.1) $(0.3) $(2.5) $(3.4) $(32.3)
Other comprehensive income (loss) before reclassifications(15.7) 2.3
 —
 0.7
 (12.7)
Amounts reclassified to statement of income—
 0.1
 —
 2.1
 2.2
Ending Balance$(41.8) $2.1
 $(2.5) $(0.6) $(42.8)
(19) Share Repurchase

On June 13, 2018, the Board of Directors authorized a share repurchase plan to repurchase up to $500.0 million of the Company's outstanding common stock. This share repurchase plan was effective August 1, 2018 and expired on March 27, 2020. Under this authorization, during the second quarter of fiscal 2020, the Company repurchased 2.4 million shares of its common stock for a total consideration of $130.1 million. As of March 28, 2020, the Company had completed this authorization.
InOn December 11, 2019, the Board of Directors authorized a new share repurchase plan to repurchase up to $500.0 million of the Company's outstanding common stock, effective at the beginning of the third quarter of fiscal 2020. On March 2, 2020 the Board of Directors approved accelerating the effective date of the new share repurchase plan from March 27, 2020 to March 2, 2020. Under this revised authorization, during the second quarter of fiscal 2020, the Company repurchased 3.5 million shares of its common stock for a total consideration of $137.5 million. There were no share repurchases in the third quarter of fiscal 2020. As of June 27, 2020, $362.6 million remained available under this authorization.
On November 19, 2019, the Board of Directors authorized the Company to repurchase up to $205 million of its outstanding shares pursuant to an accelerated share repurchase ("ASR") agreement. On November 22, 2019, the Company executed the ASR agreement with Goldman Sachs & Co. ("Goldman Sachs") pursuant to which the Company repurchased $205 million of the Company's common stock. The initial delivery of approximately 80% of the shares under the ASR was 3.3 million shares for which the Company initially allocated $164.0 million of the $205 million paid to Goldman Sachs during the first quarter of fiscal 2017, one of the Company's cost-method equity investments became a marketable security, and the Company recorded the increase in value on a gross basis of $4.0 million to other comprehensive income.


(17) New Accounting Pronouncements

In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350). This guidance simplifies how companies calculate goodwill impairments by eliminating Step 2 of the impairment test. The guidance requires companies to compare the fair value of a reporting unit to its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value. The guidance is effective for annual periods beginning after December 15, 2019, and is applicable to the Company in fiscal 2020. Early adoption is permitted.

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740). The guidance requires companies to recognize the income tax effects of intercompany sales and transfers of assets, other than inventory, in the income statement as income tax expense (or benefit) in the period in which the transfer occurs. The guidance is effective for annual periods beginning after December 15, 2017, and is applicable to the Company in fiscal 2019. Early adoption is permitted as of the beginning of an annual reporting period. The Company is currently evaluating the impact of the adoption of ASU 2016-16 on its consolidated financial position and results of operations.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flow (Topic 230). The guidance reduces diversity in how certain cash receipts and cash payments are presented and classified in the Statements of Cash Flows. Certain of ASU

2016-15 requirements are as follows: 1) cash payments for debt prepayment or debt extinguishment costs should be classified as cash outflows for financing activities, 2) contingent consideration payments made soon after a business combination should be classified as cash outflows for investing activities and cash payment made thereafter should be classified as cash outflows for financing up to the amount of the contingent consideration liability recognized at the acquisition date with any excess classified as operating activities, 3) cash proceeds from the settlement of insurance claims should be classified on the basis ofevaluated the nature of the loss, 4) cash proceeds fromforward contract aspect of the ASR under ASC 815 and concluded equity classification was appropriate. Final settlement of Corporate-Owned Life Insurance (COLI) Policies should be classified as cash inflows from investing activities and cash payments for premiums on COLI policies may be classified as cash outflows for investing activities, operating activities, or a combinationthe transaction under the ASR occurred in the second quarter of investing and operating activities, and 5) cash paid to a tax authority byfiscal 2020. At settlement, Goldman Sachs delivered an employer when withholdingadditional 0.6 million shares from an employee's award for tax-withholding purposes should be classified as cash outflows for financing activities. The guidance is effective for annual periods beginning after December 15, 2017, and is applicable to the Company in fiscal 2019. Early adoption is permitted. The adoption of ASU 2016-15 is not expected to have a material effect on the Company's consolidated financial statements.common stock.

(20) New Accounting Pronouncements

See Note 1 for Recently Adopted Accounting Pronouncements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326). and subsequently a number of improvements. The guidance requires that financial assets measured at amortized cost be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis. The income statement reflects the measurement of credit losses for newly recognized financial assets, as well as the expected credit losses during the period. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. Credit losses relating to available-for-sale debt securities will be recorded through an allowance for credit losses rather than as a direct write-down to the security. The updated guidance is effective for annual periods beginning after December 15, 2019, and is applicable to the Company in fiscal 2021. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of ASU 2016-13, as well as all codification improvements in ASU 2019-04, ASU 2019-10, ASU 2019-11 and ASU 2020-03, on its consolidated financial position and results of operations.
        
In February 2016,November 2019, the FASB issued ASU No. 2016-02, Leases2019-08, Compensation - Stock Compensation (Topic 842)718) and Revenue from Contracts with Customers (Topic 606). The guidance requires an entity to recognize a right-of-use assetidentifies, evaluates, and a lease liabilityimproves areas of GAAP for virtually allwhich cost and complexity can be reduced while maintaining or improving the usefulness of its leases with terms of more than 12 months. Recognition, measurement and presentation of expenses will depend on classification as a finance or operating lease.the information provided. The amendments also require certain quantitativein that Update expanded the scope of Topic 718 to include share-based payment transactions for acquiring goods and qualitative disclosures about leasing arrangements. Theservices from nonemployees. For entities that have adopted the amendments in Update 2018-07, the updated guidance is effective for annual periods beginning after December 15, 2018,2019, and is applicable to the Company in fiscal 2020.2021. Early adoption is permitted. The updated guidance requires a modified retrospective adoption. The Company is currently evaluating the anticipated impact of the adoption of ASU 2016-022019-08 on its consolidated financial position and results of operations.

In January 2016,December 2019, the FASB issued ASU No. 2016-01, Financial Instruments2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes. The Board is issuing this Update as part of its initiative to reduce complexity in accounting standards (the Simplification Initiative). For public business entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company is currently evaluating the impact of the adoption of ASU 2019-12 on its consolidated financial position and results of operations.

In January 2020, FASB issued ASU No. 2020-01, Investments - Overall (Subtopic 825-10): RecognitionEquity Securities (Topic 321), Investments - Equity Method and MeasurementJoint Ventures (Topic 323), and Derivatives and Hedging (Topic 815). The Board is issuing this Update to clarify certain interactions between the guidance to account for certain equity securities under Topic 321, the guidance to account for
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Table of Financial AssetsContents
investments under the equity method of accounting in Topic 323, and Financial Liabilities.the guidance in Topic 815. This guidance changesupdate could change how entities measurean entity accounts for an equity investmentssecurity under the measurement alternative or a forward contract or purchased option to purchase securities that, do not result in consolidation and are notupon settlement of the forward contract or exercise of the purchased option, would be accounted for under the equity method. Entities will be required to measure these investments atmethod of accounting or the fair value atoption in accordance with Topic 825, Financial Instruments. For entities that have adopted the end of each reporting period and recognize changesamendments in fair value in net income. A practicability exception will be available for equity investments that do not have readily determinable fair values, however;Update 2020-01, the exception requires the Company to consider relevant transactions that can be reasonably known to identify any observable price changes that would impact the fair value. This guidance also changes certain disclosure requirements and other aspects of current U.S. GAAP. Thisupdated guidance is effective for annual periods beginning after December 15, 2017,2020, and is applicable to the Company in fiscal 2019.2022. Early adoption is permitted. The Company is currently evaluating the anticipated impact of the adoption of ASU 2016-012020-01 on its consolidated financial position and results of operations.

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In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which provides guidance for revenue recognition. This ASU is applicable to any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer
Table of nonfinancial assets. ASU 2014-09 will supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled to receive in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under current U.S. GAAP. These judgments may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. ASU 2014-09 is effective prospectively for fiscal years, and interim reporting periods within those years, beginning after December 15, 2017, which is fiscal 2019 for the Company. The Company will adopt Topic 606 effective September 30, 2018 and has established a cross-functional team to evaluate and implement the new revenue recognition rules. The Company will adopt Topic 606 using the modified retrospective method but has not finalized evaluating the anticipated impact of the adoption of ASU 2014-09 on its consolidated financial position and results of operations.Contents


Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
CAUTIONARY STATEMENT
Some of the statements contained in this report are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.1934, as amended (the "Exchange Act"). These statements involve known and unknown risks, uncertainties and other factors which may cause our or our industry’s actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements may include, but are not limited to, statements regarding:
 
•the ongoing and possible future effects of the global COVID-19 pandemic and associated economic disruptions on our business, financial condition, results of operations and cash flows and our ability to further draw down our revolver;
•the impact of cost-cutting measures we have taken in response to the COVID-19 pandemic;
•the effect of the continuing worldwide macroeconomic uncertainty, including the UK's decision to leave the European Union (known as Brexit), on our business and results of operations;
•the coverageeffect of the current trade war between the U.S. and reimbursement decisions of third-party payorsother nations, most notably China, and the guidelines, recommendations, and studies published by various organizations relating toimpending impact of tariffs on the usesale of our products in those countries and treatments;
the uncertainty of the impact of cost containment efforts and federal healthcare reform legislation on our business and results of operations;
the impactpotential increased costs we may incur to our results of operations from the disposal of our blood screening business to Grifols, and the operational challenges of separating this business unitpurchase materials from our molecular diagnostics business;suppliers to manufacture our products;
•the ability to successfully manage ongoing organizationaldevelopment of new competitive technologies and strategic changes, including our ability to attract, motivateproducts, and retain key employees;
the impact and anticipated benefits of completed acquisitions, including our acquisition of Cynosure, Inc. in the second quarter of fiscal 2017, and acquisitions we may complete in the future;acquisitions;
•the ability to consolidate certain of our manufacturing and other operations on a timely basis and within budget, without disrupting our business and to achieve anticipated cost synergies related to such actions;
•the ability to successfully manage ongoing organizational and strategic changes, including our goal of expanding our market positions;ability to attract, motivate and retain key employees;
the development of new competitive technologies and products;
•regulatory approvals and clearances for our products;products, including the implementation of the new European Union Medical Device Regulations;
•potential cybersecurity threats and targeted computer crime;
•the coverage and reimbursement decisions of third-party payors;
•the uncertainty of the impact of cost containment efforts and federal healthcare reform legislation on our business and results of operations;
•the guidelines, recommendations, and studies published by various organizations relating to the use of our products;
•the effect of consolidation in the healthcare industry;
•production schedules for our products;
•the anticipated development of markets we sell our products into and the success of our products in these markets;
•the anticipated performance and benefits of our products;
•business strategies;
•estimated asset and liability values;
•the impact and costs and expenses of any litigation we may be subject to now or in the future;
•our compliance with covenants contained in our debt agreements;
•anticipated trends relating to our financial condition or results of operations, including the impact of interest rate and foreign currency exchange fluctuations;fluctuations, including the potential impact of the proposed phase out of LIBOR by the end of 2021; and
•our liquidity, capital resources and the adequacy thereof.
In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “potential” and similar expressions intended to identify forward-looking statements. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by such forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, these forward-looking statements represent our estimates and assumptions only as of the date of this report. Except as otherwise required by law, we expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained in this report to reflect any change in our expectations or any change in events, conditions or circumstances on which any of our forward-looking statements are based. Factors that could cause or
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Table of Contents
contribute to differences in our future financial results include the cautionary statements set forth herein and in our other filings with the Securities and Exchange Commission, including those set forth under "Risk Factors" set forth in Part II, Item 1A of this Quarterly Report, if any, as well as those described in our Annual Report on Form 10-K for the fiscal year ended September 30, 2017.28, 2019 or any other of our subsequently filed reports, including, without limitation, our Quarterly Report on Form 10-Q for the fiscal Quarter ended March 28, 2020. We qualify all of our forward-looking statements by these cautionary statements.

OVERVIEW
We are a developer, manufacturer and supplier of premium diagnostics products, medical imaging systems, and surgical products with an emphasisfocused on women's health. On March 22, 2017, we acquired Cynosure, Inc., or Cynosure. Cynosure is a developer, manufacturerhealth and supplier of a broad array ofwell-being through early detection and treatment. Until recently our product portfolio included light-based aesthetic and medical treatment systems. The products are used to provide a diverse rangetreatments systems sold by our former Medical Aesthetic business. During the second and third quarters of treatment applications such as non-invasive body contouring, hair removal, skin revitalization and scar reduction, as well as the treatment of vascular lesions. The Cynosure business is referred to as Medical Aesthetics and operates as a separate business segment. As a result of our acquisition of Cynosure,fiscal 2020, we operateoperated in fivefour segments: Diagnostics, Breast Health, Medical Aesthetics, GYN Surgical and Skeletal Health. We completed the sale of our Medical Aesthetics segment on December 30, 2019 (the first day of the second quarter of fiscal 2020). We sell and service our products through a combination of direct sales and service personnel and a network of independent distributors and sales representatives.
We offer a wide range of diagnostic products which are used primarily to aid in the diagnosis of human diseases and through January 31, 2017, we offered products that screened donated human blood and plasma.diseases. Our primary diagnostics products include our Aptima family of molecular diagnostic assays, which run on our advanced instrumentation systems (Panther and Tigris), our ThinPrep cytology system, and the Rapid Fetal Fibronectin Test and, through January 31, 2017, our Procleix blood screening assays.Test. The Aptima family of molecular diagnostic assays is used to detect, among other things, the infectious microorganisms that cause the common sexually transmitted diseases, or STDs, such as chlamydia and gonorrhea, certain high-risk strains of human papillomavirus, or HPV, and Trichomonas vaginalis, the parasite that causes trichomoniasis. In addition, the Aptima portfolio includes quantitative viral load tests for HIV, Hepatitis C and Hepatitis B. The Aptima portfolio also includes diagnostic tests for a range of acute respiratory ailments that are run on the Panther Fusion system, a field upgradeable instrument addition to the Panther. During the second quarter of fiscal 2020, the U.S. Food and Drug Administration (the "FDA") granted Emergency Use Authorization (EUA) for our Panther Fusion SARS-CoV-2 assay for testing for the COVID-19 virus. During the third quarter of fiscal 2020, the FDA granted EUA for our Aptima SARS-CoV-2 assay for use on our standard Panther instrument, more than 2,000 of which have been purchased by clinical laboratories around the world. The ThinPrep System is primarily used in cytology applications, such as cervical cancer screening, and the Rapid Fetal Fibronectin Test assists physicians in assessing the risk of pre-term birth. In blood screening, we developed and manufactured the Procleix family of assays, which are used to detect various infectious diseases. These blood screening products were marketed worldwide by our former blood screening collaborator, Grifols S.A., or Grifols, to whom we sold the blood screening business.
In the first quarter of fiscal 2017, we entered into a definitive agreement to sell our blood screening business to Grifols for a sales price of $1.85 billion in cash, subject to adjustment based on the closing amount of inventory. The transaction closed on January 31, 2017 and we received $1.865 billion. The sales price was subject to adjustment based on a finalization of inventory provided to Grifols. The sale resulted in a gain of $899.7 million recorded in the second quarter of fiscal 2017. As a result of this disposition and proceeds received, we recorded a tax obligation of $649.5 million, which was paid in fiscal 2017. Upon the closing of the transaction, our existing collaboration agreement with Grifols terminated, and a new collaboration agreement was executed as part of this transaction for us to provide certain research and development services to Grifols. In addition, we agreed to provide transition services to Grifols over a two to three year period depending on the nature of the respective service, including the manufacture of inventory, and we are in effect serving as a contract manufacturer of assays for Grifols for a two to three year period from the disposal date. We also agreed to sell Panther instrumentation and certain supplies to Grifols as part of a long term supply agreement. Following the closing of this disposition, we no longer operate our blood screening business, except to the limited extent we have agreed to support Grifols. Under the long term supply agreement, transition services agreement to manufacture assays, and research and development services, we recognized revenues of $12.6 million in the first quarter of fiscal 2018. For the disposed blood screening business, in the first quarter of fiscal 2017, revenue was $65.2 million, gross profit was $43.6 million, and operating income was $28.6 million. Revenue, gross profit and operating income of the disposed business represents the financial impact of the business as it was operated prior to the date of disposition. The operating expenses include only those that were incurred directly by and were retained by the disposed business and are now incurred by Grifols. See Note 10 to our consolidated financial statements included herein.
Our Breast Health products include a broad portfolio of solutions for breast cancer care for radiology, pathology and surgery. These solutions include breast imaging and related productsanalytics, such as our 2D and accessories, including digital3D mammography systems computer-aided detection, or CAD, for mammography and reading workstations, minimally invasive breast biopsy guidance systems and devices, breast biopsy site markers and breast biopsy guidance systems.localization, specimen radiology, ultrasound and connectivity solutions. Our most advanced breast imaging platform, Selenia Dimensions and 3Dimensions, utilizes a technology called tomosynthesis to produce 3D images that show multiple contiguous slice images of the breast, which we refer to as the Genius 3D Mammography exam, as well as conventional 2D full field digital mammography images. Our clinical results for FDA approval demonstrated that conventional 2D digital mammography with the addition of 3D tomosynthesis is superior to 2D digital mammography alone for both screening and diagnostics.diagnostics for women of all ages and breast densities. In addition, through our acquisitions of Faxitron Bioptics, LLC ("Faxitron") and Focal Therapeutics, Inc. ("Focal") we have expanded our product portfolio to include breast conserving surgery products.
Our GYN Surgical products include our NovaSure Endometrial Ablation System, or NovaSure, and our MyoSure Hysteroscopic Tissue Removal System, or MyoSure, as well as our Fluent Fluid Management system, or Fluent. The NovaSure portfolio is comprised of the NovaSure CLASSIC and NovaSure ADVANCED devices and involves a trans-cervical procedure for the treatment of abnormal uterine bleeding. The MyoSure suite of devices offers four options to provide incision-less removal of fibroids, polyps, and other pathology within the uterus. The Fluent system is a fluid management system that provides liquid distention during diagnostic and operative hysteroscopic procedures.
Our disposed of Medical Aesthetics segment offersoffered a portfolio of aesthetic treatment systems including SculpSure, PicoSure and MonaLisa Touch that enableenabled plastic surgeons, dermatologists and other medical practitioners to perform non-invasive and minimally invasive procedures to remove hair, treat vascular and benign pigmented lesions, remove multi-colored tattoos, revitalize the skin, reduce fat through laser lipolysis, reduce cellulite, clear nails infected by toe fungus, ablate sweat glands and improve gynecologic health. This segment also markets radio frequency, or RF, energy sourced medical devicesoffered both non-surgical and surgical aesthetic treatments and procedures.
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On November 20, 2019, we entered into a definitive agreement to sell our Medical Aesthetics business for precision surgical applications sucha sales price of $205.0 million in cash, less certain adjustments. The sale was completed on December 30, 2019, and the Company received cash proceeds of $153.4 million. The sales price remains subject to adjustment pursuant to the terms of the definitive agreement, and the Company is in process of evaluating adjustments to the final sales price. As a result of the sale, we recorded a $30.2 million impairment charge in the first quarter of fiscal 2020 to record the asset group to its fair value less costs to dispose as facial plasticit met the assets held-for-sale criteria. For additional information, see Note 6 to our consolidated financial statements included herein. Following the sale of our Medical Aesthetics business, we will not receive any further revenue related to this business, although additional expenses will be incurred in connection with indemnification provisions primarily related to legal and general surgery, gynecology, ear, nose, and throat procedures, back and thigh procedures, ophthalmology, oral and maxillofacial surgery, podiatry and proctology.
Our GYN Surgical products include our NovaSure Endometrial Ablation System, or NovaSure, and our MyoSure

Hysteroscopic Tissue Removal System, or MyoSure. The NovaSure endometrial ablation istax matters. In addition, we have agreed to provide transition services for a one-time procedure for the treatmentperiod of abnormal uterine bleeding. MyoSure tissue removal is a minimally invasive procedure that targets and removes fibroids, polyps, and other pathology within the uterus.up to 15 months.
Our Skeletal Health segment offers Discovery andsegment's products includes the Horizon X-ray bone densitometers that assess theDXA, a dual energy x-ray system, which evaluates bone density of fracture sites; and performs body composition assessments, and the Fluoroscan Insight FD mini C-arm, imaging systems that assistwhich assists in performing minimally invasive orthopedic surgical procedures on a patient's extremities, such as the hand, wrist, knee, foot, and ankle.
Unless the context otherwise requires, references to we, us, Hologic or our company refer to Hologic, Inc. and its consolidated subsidiaries.
Trademark Notice
Hologic is a trademark of Hologic, Inc. Other trademarks, logos, and slogans registered or used by Hologic and its divisions and subsidiaries in the United States and other countries include, but are not limited to, the following: 2D Dimensions, 3Dimensions, 3D Mammography, AccuProbe, Affirm, Prone,Alpha Imaging, Aptima, ATEC, Brevera, C-View, Cervista, Cynosure, Dimensions, Discovery,BioZorb, Celero, Definity, Emsor, Eviva, Faxitron, Fluent, Fluoroscan, Gen-Probe, Genius,Focal, Genius 3D, Genius 3D Mammography,Health Beacons, Hologic Clarity HD, Horizon, Icon, Invader, Medicor, MedLite, MultiCare,Insight, Intelligent 2D, LOCalizer, MyoSure, NovaSure, PACE, Panther, PicoSure, Procleix, Prodesse, Progensa,Panther Fusion, Rapid Fibronectin Test, SculpSure,fFN, Selenia, Selenia Dimensions, SmartCurve, SuperSonic, SuperSonic Imagine, ThinPrep, and Tigris.
Procleix, Ultrio, Cynosure and Ultrio Plus areMonaLisa Touch remain trademarks of Grifols Worldwide Operations Limited. MonaLisa Touch isCynosure, which we no longer own following the sale of the Medical Aesthetics business on December 30, 2019.
COVID-19 Considerations
The pandemic caused by the spread of the novel strain of coronavirus disease 2019 ("COVID-19") has created significant volatility, uncertainty and economic disruption in the markets we sell our products into, primarily the U.S., Europe and Asia-Pacific. In the second and third quarters of fiscal 2020, the spread of COVID-19 has negatively impacted business and healthcare activity globally. As healthcare systems respond to the increasing demands of managing COVID-19 and the resulting economic uncertainties, governments around the world have imposed measures designed to reduce the transmission of COVID-19, and individuals are responding to the fears of contracting COVID-19. In particular, elective procedures and exams have been and continue to be delayed or cancelled, there has been a registered trademarksignificant reduction in physician office visits, and hospitals have postponed or canceled capital purchases as well as limited or eliminated services, however in the second half of DEKA M.E.L.A. Srl-Calenzano-Italy.the third quarter of fiscal 2020, we started to see a recovery of elective procedures and exams. As further discussed in this Report, these responses have had, and we believe will continue to have, a negative impact on our operating results and cash flows. However, the impact of our commercial release of our COVID assays more than offset these impacts as we generated significant revenue from the sales of these assays in the third quarter of fiscal 2020.The negative effects of COVID-19 and the associated economic disruptions were felt primarily beginning in the second half of March in many of our end-markets and earlier in Asia, primarily China, and the effect to our legacy products in the third fiscal quarter was significant. We believe the impact on our businesses may begin to lessen in the fourth quarter and continue to do so in subsequent periods, however, the impacts on these periods could continue to be significant.

While our results of operations and cash flows in the third quarter of fiscal 2020 were positively impacted by the sale of our COVID assays, the COVID-19 pandemic could have an adverse impact on our operating results, cash flows and financial condition in the future. The factors that could create such adverse impact include: the severity and duration of the COVID-19 pandemic; continued demand for COVID-19 testing; competition from existing and new COVID-19 testing technologies and products; the COVID-19 pandemic’s impact on the U.S. and international healthcare systems, the U.S. economy and worldwide economy; and the timing, scope and effectiveness of U.S. and international governmental responses to the COVID-19 pandemic and associated economic disruptions.

In addition to adversely affecting demand for our products, other than our COVID assays, COVID-19 and associated economic disruptions could continue to have an adverse impact on our supply chains and distribution systems, including as a result of impacts associated with preventive and precautionary measures that we, other businesses and governments have taken and will take. A reduction or interruption in any of our manufacturing processes could have a material adverse effect on our business.

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We expect that the uncertainty surrounding world financial markets and deteriorating worldwide macroeconomic conditions resulting from the pandemic have caused and may continue to cause the purchasers of medical equipment to decrease their medical equipment purchasing and procurement activities. Additionally, the pandemic has caused and may further cause constrictions in world credit markets that have and could cause our customers to experience increased difficulty in paying their existing obligations to us or in securing the financing necessary to purchase our products. Economic uncertainty has and may continue to result in cost-conscious consumers focusing on acute care rather than wellness, which would also continue to adversely affect demand for our products.
As we assessed the potential longer term economic and capital market uncertainties resulting from the COVID-19 pandemic, at the end of March 2020 we suspended our accounts receivable securitization program and borrowed $750.0 million under our revolver. We used $250.0 million of these proceeds to pay off all amounts then owed under our accounts receivable securitization agreement, and retained the balance as cash reserve. As of the end of the third quarter of fiscal 2020, we repaid $250.0 million of the $750.0 million borrowed under our revolver. As of June 27, 2020, we had an additional $1 billion available under our revolver.
In response to the negative impact of COVID-19 on our business, in April 2020 we initiated cost-cutting measures, which included not only reducing discretionary and variable spend, such as travel, marketing programs and the use of contractors, consultants and temporary help, but we also implemented employee furloughs, salary cuts primarily in the U.S., reduced hours and in certain instances, employee terminations. As of the end of the third quarter of fiscal 2020, substantially all of the Company's employee cost-cutting measures ceased. Further, we shut down certain manufacturing facilities temporarily and implemented reduced work-week schedules in response to lower near-term demand for many of our products.
We have also taken measures to ensure the safety of our employees and to comply with governmental orders. These measures could require that our employees continue to work remotely or otherwise refrain from reporting to their normal workplace for extended periods of time, which in turn could result in a decrease in our commercial and marketing activities.

ACQUISITIONS


Cynosure, Inc.SuperSonic Imagine


On March 22, 2017,August 1, 2019, we completed the acquisition of Cynosure and acquired allapproximately 46% of the outstanding shares of Cynosure.SuperSonic Imagine S. A., or SSI. SSI, headquartered in France, specializes in ultrasound imaging and designs, develops and markets an ultrasound platform used in the non-invasive care path for the characterization of breast, liver or prostate diseases. We initially accounted for this investment as an equity method investment.

On November 21, 2019, we acquired an additional 7.6 million shares of SSI for $12.6 million. As a result, we owned approximately 78% of the outstanding shares of SSI at November 21, 2019 and controlled SSI's voting interest and operations. We performed purchase accounting as of November 21, 2019 and beginning on that date the financial results of SSI are included within our consolidated financial statements. We remeasured the initial investment of 46% of the outstanding shares of SSI to its fair value at the acquisition date, resulting in a gain of $3.2 million in the first quarter of fiscal 2020. The acquisition was funded through available cash, and the total purchase price was $1.66 billion.

The preliminary allocation$69.3 million, which consisted of $17.9 million for the purchase price is basedequity method investment in SSI, $12.6 million for shares acquired on estimates ofNovember 21, 2019, $30.2 million for loans we provided to SSI prior to the fair value of assets acquiredacquisition that are considered forgiven, and liabilities assumed as of March 22, 2017. The Company has not yet obtained all of the information related to$8.6 million representing the fair value of the acquired assets and liabilities, primarily taxes, to finalize the purchase price allocation. The purchase price has been allocated to the acquired assets and assumed liabilities basednoncontrolling interests as of November 21, 2019. Based on management’s estimate of their fair values.

As part of theour preliminary purchase price allocation, the Company has determined the identifiable intangible assets are developed technology of $736.0 million, in-process research and development of $107.0 million, trade names of $74.0 million, a distribution agreement of $42.0 million and customer relationships of $35.0 million. The preliminary fair value of the intangible assets has been estimated using the income approach, specifically the excess earning method and relief from royalty method, and the cash flow projections were discounted using rates ranging from 11% to 12%. The cash flows are based on estimates used to price the transaction, and the discount rates applied were benchmarked with reference to the implied rate of return from the transaction model and the weighted average cost of capital.

The developed technology assets comprise know-how, patents and technologies embedded in Cynosure’s products and relate to currently marketed products. In-process research and development projects relate to in-process projects that have not reached technological feasibility as of the acquisition date and have no alternative future use. The primary basis for determining technological feasibility of these projects is obtaining regulatory approval to market the underlying product or expected commercial release depending on the project. We recorded $107.0 million of in-process research and development assets related to three projects, which were expected to be completed during fiscal 2018 and 2019 with a preliminary cost to complete of approximately $18.0 million. During the fourth quarter of fiscal 2017, we obtained regulatory approval for two projects with an aggregate fair value of $61.0 million and these assets were reclassified to developed technology. The remaining project is expected to be completed during fiscal 2019 with an estimated cost to complete of approximately $4.0 million. Given the uncertainties inherent with product development and introduction, we cannot assure that any of our product development efforts will be successful, completed on a timely basis or within budget, if at all. All of the in-process research and development assets were valued using the multiple-period excess earnings method approach using discount rates ranging from 14% to 22%.

The excess of the purchase price over the preliminary estimated fair value of the tangible net assets and intangible assets acquired of $683.5 million was recorded to goodwill. The factors contributing to the recognition of the amount of goodwill are based on several strategic and synergistic benefits that are expected to be realized from the Cynosure acquisition. These benefits include the expectation that the Company's entry into the aesthetics market will significantly broaden our offering in women's health. The Company is expected to benefit from a broader global presence, synergistic utilization of Hologic's direct sales force, primarily its GYN Surgical sales force, with certain Cynosure products and entry into an adjacent, cash-pay segment.

Medicor Medical Supply

On April 7, 2017, we completed the acquisition of MMS Medicor Medical Supplies GmbH, or Medicor, for a purchase price of approximately $19.0 million. Medicor was a long-standing distributor of our Breast and Skeletal Health products in Germany, Austria and Switzerland. Based on the preliminary valuation, we have allocated $5.4$45.3 million of the purchase price to the preliminary value of intangible assetsintangibles and $8.9$22.4 million to goodwill. The allocation of the purchase price is preliminary as we are continuingcontinue to gather information supporting the acquired assets and liabilities.liabilities, primarily income taxes and recognition of uncertain tax positions, to finalize the purchase price allocation. 


Emsor, S.A.As of June 27, 2020, we owned approximately 81% of SSI, and accordingly we have recorded an adjustment to our net income for the non-controlling interest we do not own of $1.5 million and $3.4 million, respectively, for the three and nine months ended June 27, 2020.


Alpha Imaging

On December 11, 2017,30, 2019, we completed the acquisition of Emsor S.A.assets from Alpha Imaging, LLC ("Emsor"Alpha Imaging"), for a purchase price of approximately $13.1$18.0 million, which includesincluded a hold-back of $1.0 million and contingent consideration, which the Company haswe estimated at $2.0$0.9 million. The contingent consideration is payable upon Emsor achieving predefined amountsshipment of cumulative revenue over a two year period frombacklog orders entered into by Alpha Imaging prior to the date of acquisition. EmsorAlpha Imaging was a long-standing distributor of the Company'sour Breast and Skeletal Health products in Spain and Portugal. Based on the Company's preliminary valuation, it has allocated $2.8 millionU.S.

Health Beacons
41


On February 3, 2020, we completed the acquisition of theHealth Beacons, Inc. ("Health Beacons"), for a purchase price of $19.3 million, which included hold-backs of $2.3 million that are payable up to eighteen months from the preliminary valuedate of intangible assets and $3.5 million to goodwill. The allocation ofacquisition. Health Beacons manufactures the purchase price is preliminary as the Company continues to gather information supporting the acquired assets and liabilities.LOCalizer product.


RESULTS OF OPERATIONS
All dollar amounts in tables are presented in millions.
Product Revenues
 
Three Months Ended  Three Months EndedNine Months Ended
December 30, 2017 December 31, 2016 Change  June 27, 2020June 29, 2019ChangeJune 27, 2020June 29, 2019Change
Amount 
% of
Total
Revenue
 Amount 
% of
Total
Revenue
 Amount %  Amount% of
Total
Revenue		Amount% of
Total
Revenue		Amount%Amount% of
Total
Revenue		Amount% of
Total
Revenue		Amount%
Product Revenues            Product Revenues
Diagnostics$279.1
 35.3% $319.1
 43.5% $(40.0) (12.5)% Diagnostics$528.7  64.2 %$298.6  35.0 %$230.1  77.1 %$1,149.5  47.3 %$879.1  35.1 %$270.4  30.8 %
Breast Health175.1
 22.1% 165.4
 22.5% 9.7
 5.9 % Breast Health111.6  13.6 %208.1  24.4 %(96.5) (46.4)%506.8  20.9 %614.0  24.5 %(107.2) (17.5)%
GYN SurgicalGYN Surgical51.3  6.2 %111.9  13.1 %(60.6) (54.2)%275.0  11.3 %322.0  12.9 %(47.0) (14.6)%
Medical Aesthetics76.7
 9.7% —
 —% 76.7
 100.0 % Medical Aesthetics—  — %68.6  8.0 %(68.6) (100.0)%49.7  2.0 %191.8  7.7 %(142.1) (74.1)%
GYN Surgical107.3
 13.6% 114.6
 15.6% (7.3) (6.4)% 
Skeletal Health12.5
 1.6% 14.3
 1.9% (1.8) (12.4)% Skeletal Health10.0  1.2 %16.8  2.0 %(6.8) (40.5)%43.5  1.8 %47.9  1.9 %(4.4) (9.2)%
$650.7
 82.3% $613.4
 83.5% $37.3
 6.1 % $701.6  85.3 %$704.0  82.5 %$(2.4) (0.3)%$2,024.5  83.3 %$2,054.8  82.1 %$(30.3) (1.5)%
We generated an increasehad a reduction in product revenues of 6.1% in both the current quarterthree and nine month periods of 0.3% and 1.5%, respectively, compared to the corresponding periodperiods in the prior year. The decrease is primarily due to the impact of the COVID-19 pandemic across all our business segments and the disposition of the Medical Aesthetics business segment. Excluding Medical Aesthetics, product revenue increased $66.2 million, or 10.4%, and $111.8 million, or 6.0%, in the current three and nine month periods, respectively, primarily relating to sales from our newly introduced COVID assays that were partially offset by reduced sales of our legacy products.
Diagnostics product revenues increased $230.1 million and $270.4 million or 77.1% and 30.8%, respectively, in the current three and nine month periods compared to the corresponding periods in the prior year primarily due to increases in Molecular Diagnostics of $290.4 million and $329.4 million, respectively, partially offset by decreases in Cytology & Perinatal of $56.2 million and $55.8 million, respectively, and decreases of $4.1 million and $3.2 million, respectively, in blood screening. We divested our acquisitionblood screening business in the second quarter of Cynosure on March 22,fiscal 2017, but continue to provide long-term access to Panther instrumentation and certain supplies to the purchaser of that business. Molecular Diagnostics product revenue (excluding blood screening) was $459.0 million and $824.7 million, respectively, in the current three and nine month periods compared to $168.6 million and $495.3 million in the corresponding periods in the prior year. The increases in the current three and nine month periods compared to the corresponding periods in the prior year were primarily attributable to revenues of $324.0 million and $328.1 million, respectively, from our two SARS-CoV-2 assays (primarily the Aptima SARS-CoV-2 assay and to a lesser extent the Panther Fusion SARS-CoV-2 assay) and an increase in Breast Health sales. Cynosure's results (afterPanther and Panther Fusion instrument sales due to demand for increased testing capacity for COVID-19. We are actively working to increase capacity production to meet worldwide demand of these assays. These increases were partially offset by decreases in the dateAptima family of acquisition) are reported in our Medical Aesthetics segmentassays of $45.7 million and is the sole business in this segment. Partially offsetting the increase, our Diagnostics business product revenues declined as$27.0 million, respectively, on a result of the sale of our blood screening business effective January 31, 2017, and we had lower revenues in GYN Surgical and Skeletal Health. Excluding blood screening, Diagnostics revenues increased $13.2 millionworldwide basis in the current three and nine month periods primarily due to lower volumes, which we attribute primarily to the impact of the COVID-19 pandemic resulting in a reduction in physician office visits and hospitals limiting services. In addition, we had a decrease in worldwide sales of our other virology products in the current three month period but a slight increase in the current nine month period. Cytology & Perinatal product revenue decreased in the current three and nine month periods primarily due to lower ThinPrep test volumes, which we primarily attribute to the impact of a reduction in wellness office visits in response to the COVID-19 pandemic, and to a lesser extent lower Perinatal product volumes. We expect a similar decrease in sales of our diagnostic products, except our COVID-19 assays, in the fourth quarter of fiscal 2020 and to a lesser extent in first quarter of 2021 and beyond as the COVID-19 pandemic continues and wellness visits are delayed or cancelled.
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Breast Health product revenues decreased $96.5 million and $107.2 million or 46.4% and 17.5%, respectively, in the current three and nine month periods compared to the corresponding period in the prior year. In addition, the first quarter of fiscal 2017 was a 14-week quarter as fiscal 2017 was a 53-week fiscal period, and we estimate that the four extra selling days in the prior year period contributed approximately $20 million to revenue, primarily in the U.S.
Diagnostics product revenues decreased 12.5% in the current quarter compared to the corresponding periodperiods in the prior year primarily due to thea decrease in blood screeningsales volume of our digital mammography systems and related workflow products (primarily Intelligent 2D, Clarity HD and SmartCurve), Affirm Prone breast biopsy tables and our interventional breast solutions Eviva, ATEC and Celero handpieces. We primarily attribute the decline in revenues to the COVID-19 pandemic in the U.S. as hospitals and imaging centers either slowed down purchases or delayed orders and installations of $53.2capital equipment units in order to focus their efforts towards COVID-19 patients and concerns on maintaining their cash and liquidity, as well as from the impact of delayed or cancelled elective imaging exams and procedures in response to the pandemic. These decreases were partially offset by the inclusion of revenues from SSI which contributed $3.0 million as a resultand $13.6 million, respectively, of product revenue in the divestiturecurrent three and nine month periods. We obtained control of SSI and began consolidating their results for the business during the second quarterlast fiscal month of FY17, and we had four fewer selling days in the first quarter of fiscal 2018. In connection with2020. We expect the divestiture agreement, we have committedmarket for our Breast Health products to providing Grifols manufacturing support through the defined transition services period and long term access to Panther instrumentation and certain supplies. As such, we will continue to generate a levelbe challenging in the fourth quarter of fiscal 2020 and beyond to the extent the COVID-19 pandemic continues and hospitals and healthcare centers continue to restrict access and wellness visits and elective medical procedures, and hospital and healthcare center capital expenditures continue to be delayed or cancelled.
GYN Surgical product revenues but much lower than historical trends. Fordecreased $60.6 million and $47.0 million or 54.2% and 14.6%, respectively, in the current three and nine month period, product revenue underperiods compared to the new long term supply agreement and transition services agreementcorresponding periods in the prior year which we attribute primarily to manufacture assays for Grifols was $10.2 million. Excludingreduced sales volumes resulting from the divestitureimpact of the blood screening business, diagnostic product revenues grew driven by increases in Molecular Diagnostics of $10.3COVID-19 pandemic. MyoSure system sales decreased $25.4 million and Cytology$18.4 million, respectively, and Perinatal of $2.9 million.
Molecular Diagnostics product revenue of $146.3NovaSure system sales decreased $29.0 million and in particular revenue related to our Aptima family of assays, increased $10.3$34.5 million, respectively. Partially offsetting these decreases in the current quarter on a worldwide basis due to our increased installed base of Panther instruments, which is driving higher volumes of assay testing and an increase in international sales of our virology products as we have recently received regulatory approval for certain of these products. These increases were partially offset by lower instrument sales and the loss of one week in the current threenine month period compared to the corresponding period in the prior year. Cytology and Perinatal product revenue increased $2.9 million due to higher international ThinPrep volumes, partially offset by slightly lower domestic volumes as average selling prices remained relatively consistent. In addition, we experiencedyear was an increase in Perinatal revenue as domestic volumes increased primarily dueFluent system sales of $7.9 million. We expect the market for our GYN Surgical products to a changecontinue to be challenging in certain customers ordering patterns.the fourth quarter of fiscal 2020 and beyond to the extent the COVID-19 pandemic continues and hospitals and healthcare centers continue to restrict access and elective medical procedures continue to be delayed or cancelled.
BreastWe divested the Medical Aesthetics segment on December 30, 2019, the beginning of our second quarter of fiscal 2020.
Skeletal Health product revenues increased 5.9%decreased $6.8 million and $4.4 million or 40.5% and 9.2% respectively, in the current quarterthree and nine month periods compared to the corresponding period in the prior year, which we attribute primarily due to increased unit volumesthe impact of our 2D and 3D Dimensions systems internationally, increasedthe COVID-19 pandemic resulting in a decrease in sales volume of our Affirm Prone table and Brevera breast biopsy system, which was recently commercially released in the US, and an increase in Eviva and ATEC volumes internationally. In addition, the acquisition of Medicor and Emsor, former distributors of our products, resulted in

higher revenues. These increases were partially offset by lower sales volume of our 2D and 3D DimensionsHorizon DXA systems and related componentsInsight FD mini C-arm system. We expect a similar decrease in the U.S. due to market and competitive dynamics, as well as a shift to lower priced systems. In addition, we experienced lower sales of our C-View software product and 3D upgradesSkeletal products in the US.
Our Medical Aesthetics business was formed in fiscal 2017 by the acquisition of Cynosure effective March 22, 2017. Accordingly, we did not have any revenues in the prior year period.
GYN Surgical product revenues decreased 6.4% in the current quarter compared to the corresponding period in the prior year primarily due to a decrease in volume of NovaSure system sales of $9.9 million in the US, which we primarily attribute to increased competition and a stagnant market for endometrial ablation, partially offset by a slight increase in average selling prices from a mix shift to the higher priced NovaSure ADVANCED device and an increase in MyoSure system sales on a worldwide basis. In addition, we had four fewer selling days in the firstfourth quarter of fiscal 2018.
Skeletal Health product revenues decreased 12.4% in the current quarter compared2020 and beyond to the corresponding period inextent the prior year, primarily dueCOVID-19 pandemic continues and hospitals and healthcare centers continue to a decrease in our mini C-arm sales in the U.S. duerestrict access, wellness and elective medical procedures continue to competitive pressures, which was partially offset by increases in Horizon osteoporosis assessment product revenues, primarily attributablebe delayed or cancelled and hospital and healthcare center capital expenditures continue to higher sales volume in the current three month period.be delayed or cancelled.
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Table of Contents
Product revenues by geography as a percentage of total product revenues were as follows:
Three Months Ended  Three Months EndedNine Months Ended
December 30, 2017 December 31, 2016  June 27, 2020June 29, 2019June 27, 2020June 29, 2019
United States74.4% 76.8% United States80.2 %74.7 %76.3 %74.3 %
Europe12.0% 11.4% Europe12.7 %11.4 %13.8 %12.3 %
Asia-Pacific9.1% 8.8% Asia-Pacific5.1 %9.3 %6.4 %8.7 %
Rest of World4.5% 3.0% Rest of World2.0 %4.6 %3.5 %4.7 %
100.0% 100.0% 100.0 %100.0 %100.0 %100.0 %
In the current quarterthree and nine month periods compared to the corresponding periodperiods in the prior year, the percentage of product revenue from Europe, Asia-Pacific and Rest of World increased andincrease in the percentage of product revenue fromin the U.S. decreased, primarily as a resultUnited States was driven by sales of our SARS-CoV-2 assays, the Cynosure acquisition, and to a lesser extent anmajority of which were sold domestically. The increase in digital mammography systems in Europe. A higher percentage of Cynosure's revenues are internationally based compared to legacy Hologic's. In addition, the percentage of product revenue derived from regions other thanEurope was due to sales of our SARS-CoV-2 assays in the U.S., Europethird quarter of fiscal 2020, and Asia-Pacific increasedfor the current nine month period, also included growth in Molecular Diagnostics as we expanded our international infrastructurecustomer base and increased sales effortsfrom the adoption of co-testing for cervical cancer screening in these regions.Germany and the inclusion of SSI. Asia-Pacific product revenue as a percentage of total product revenue decreased primarily due to lower sales in China in the second and third quarters of fiscal 2020, which we primarily attribute to the effect of the COVID-19 pandemic and the disposition of Medical Aesthetics.
Service and Other Revenues
 
 Three Months Ended 
 December 30, 2017 December 31, 2016 Change 
 Amount 
% of
Total
Revenue
 Amount 
% of
Total
Revenue
 Amount % 
Service and Other Revenues$140.4
 17.7% $121.0
 16.5% $19.4
 16.0% 
 Three Months EndedNine Months Ended
 June 27, 2020June 29, 2019ChangeJune 27, 2020June 29, 2019Change
 Amount% of
Total
Revenue		Amount% of
Total
Revenue		Amount%Amount% of
Total
Revenue		Amount% of
Total
Revenue		Amount%
Service and Other Revenues$121.3  14.7 %$148.4  17.4 %$(27.1) (18.3)%$405.0  16.7 %$446.6  17.9 %$(41.6) (9.3)%
Service and other revenues consist primarily of revenue generated from our field service organization to provide ongoing service, installation and repair of our products. The majority of these revenues are generated within our Breast Health segment, and to a lesser extent, ourthe Medical Aesthetics business.business prior to its disposition in the beginning of the second quarter of fiscal 2020. The reduction in service and other revenue is primarily due to the disposition of Medical Aesthetics, resulting in a decrease in revenue of $16.4 million and $31.2 million in the current three and nine month periods. In addition, while the Breast Health business continues to convert a high percentage of our installed base of digital mammography systems to service contracts upon expiration of the warranty period. Our Medical Aesthetics business represented approximately 10% ofperiod, and Breast Health service revenues in the first quarter of fiscal 2018. Service and other revenuescontract revenue increased 16.0% in the current quarterthree and nine month periods, the decline in installation, spare parts and training revenue more than offset that increase as hospitals and healthcare centers restricted access and capital expenditures continue to be delayed or cancelled due to the COVID-19 pandemic. Furthermore, we generated less service revenue in blood screening from Grifols in the current year periods. In addition, the prior year nine month period included additional one-time license revenue in Breast Health.
Cost of Product Revenues
 Three Months EndedNine Months Ended
 June 27, 2020June 29, 2019ChangeJune 27, 2020June 29, 2019Change
 Amount% of
Product
Revenue		Amount% of
Product
Revenue		Amount%Amount% of
Product
Revenue		Amount% of
Product
Revenue		Amount%
Cost of Product Revenues$225.1  32.1 %$235.8  33.5 %$(10.7) (4.5)%$685.9  33.9 %$700.8  34.1 %$(14.9) (2.1)%
Amortization of Intangible Assets62.9  9.0 %78.6  11.2 %(15.7) (20.0)%189.4  9.4 %239.9  11.7 %(50.5) (21.1)%
Impairment of Intangible Assets—  — %—  — %—  — %25.8  1.3 %374.6  18.2 %(348.8) (93.1)%
$288.0  41.1 %$314.4  44.7 %$(26.4) (8.4)%$901.1  44.5 %$1,315.3  64.0 %$(414.2) (31.5)%
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Table of Contents
Cost of Product Revenues. The cost of product revenues as a percentage of product revenues was 32.1% and 33.9% in the current three and nine month periods, respectively, compared to 33.5% and 34.1% in the corresponding periods in the prior year. Cost of product revenues as a percentage of revenue decreased in the current three and nine month periods primarily due to sales of our SARS-CoV-2 assays, which have higher gross margins compared to our other diagnostic products, comprising 46.2% and 16.2% of total product revenue in the current three and nine month periods, respectively. Also benefiting the gross margin was the disposition of Medical Aesthetics, which had lower gross margins compared to our remaining businesses. Partially offsetting these decreases was an increase in inventory reserves.
Diagnostics' product costs as a percentage of revenue decreased in the current three and nine month periods compared to the corresponding periods in the prior year primarily due to sales of our SARS-CoV-2 assays and higher overall production reducing fixed overhead on a unit basis, partially offset by an increase in inventory reserves and freight charges internationally.
Breast Health’s product costs as a percentage of revenue increased in the current three and nine month periods compared to the corresponding periods in the prior year primarily due to decreased sales volume across the majority of our product lines, period costs for temporary facility shut-downs and reduced manufacturing utilization and an increase in inventory reserves. These decreases were primarily due to the COVID-19 pandemic in the U.S. as hospitals and imaging centers either slowed down purchases or delayed orders and installations of capital equipment units in order to focus their efforts towards COVID-19 patients and concerns on maintaining their cash and liquidity, as well as from the impact of delayed or cancelled elective imaging exams, screenings and procedures as described above.
GYN Surgical’s product costs as a percentage of revenue increased in the current three and nine month periods compared to the corresponding period in the prior year primarily due to $14.6 million contributedthe significant decrease in sales volume of our NovaSure and MyoSure devices, period costs for the temporary shutdown of our manufacturing facility and reduced manufacturing utilization, as well as the continued product mix shift to higher volumes of MyoSure devices and lower volumes of NovaSure devices, which have higher margins as compared to MyoSure. For the current nine month period, this trend was partially offset by Cynosure, which was acquiredan increase in sales volume in the current year for the higher margin NovaSure ADVANCED device compared to the Classic device.
We divested the Medical Aesthetics segment on December 30, 2019, the beginning of our second quarter of fiscal 2017, and higher service contract conversion and renewal rates.

Cost of Product Revenues
 Three Months Ended 
 December 30, 2017 December 31, 2016 Change 
 Amount 
% of
Product
Revenue
 Amount 
% of
Product
Revenue
 Amount % 
Cost of Product Revenues$213.7
 32.8% $198.3
 32.3% $15.4
 7.8% 
Amortization of Intangible Assets79.8
 12.3% 73.5
 12.0% 6.3
 8.5% 
 $293.5
 45.1% $271.8
 44.3% $21.7
 8.0% 
Cost of Product Revenues. The cost of product revenues as a percentage of product revenues was 32.8% in the current quarter compared to 32.3% in the corresponding period in the prior year. Cost of product revenues as a percentage of product revenues in the current quarter were relatively consistent within the legacy Hologic segments. However, the cost of product revenues was higher due to the inclusion of Cynosure results as Cynosure products have a lower gross margin than our legacy products.
Diagnostics' product costs as a percentage of revenue decreased slightly in the current quarter compared to the corresponding period in the prior year primarily due to increased Aptima assay volumes, increased sales volume of Perinatal products that have high margins, favorable manufacturing variances and lower instrument sales, which have low margins. These improvements were primarily offset by the divestiture of the blood screening business that occurred during the second quarter of fiscal 2017. The products that we supply to Grifols under the new supply and collaboration agreements are at lower gross margins than we earned in the disposed business, and we expect this to continue.
Breast Health’s product costs as a percentage of revenue was relatively consistent in the current quarter compared to the corresponding period in the prior year. Higher gross margins from sales volume increases in the Affirm Prone table, the Brevera breast biopsy system,and Eviva and ATEC devices, and favorable manufacturing variances were offset by a reduction in 3D Dimensions systems, a mix shift to lower priced 3D systems and a decrease in 3D upgrades and C-View software sales, which have higher gross margins than capital equipment sales.
GYN Surgical’s product costs as a percentage of revenue was relatively consistent in the current quarter compared to the corresponding period in the prior year.2020.
Skeletal Health’s product costs as a percentage of revenue decreasedincreased in the current quarterthree and nine month periods compared to the corresponding periodperiods in the prior year primarily due to higher obsolescence charges recordedlower volumes of sales and an increase in the prior year.inventory reserves.
Amortization of Intangible Assets. Amortization of intangible assets relates to acquired developed technology, which is generally amortized over its estimated useful life of between 85 and 15 years using a straight-line method or, if reliably determinable, based on the pattern in which the economic benefits of the assets are expected to be consumed. Amortization expense has increaseddecreased in the current three and nine month periodperiods compared to the corresponding periods in the prior year primarily due to $17.4lower amortization of $15.2 million and $48.3 million, respectively, from intangible assets acquired in the Cynosure acquisition as a result of impairment charges (partially offset by shortening lives of certain assets) in fiscal 2019, the classification of the Medical Aesthetic business as assets held-for-sale in November 2019 and its subsequent disposition on December 30, 2019, and lower amortization of intangible assets acquired in the Cytyc acquisition which reduce over time. These decreases were partially offset by amortization expense in the current three and nine month periods related to intangible assets acquired in the CynosureSSI acquisition partially offset by a decreaseof $1.1 million and $2.5 million, respectively.
Impairment of Intangible Assets. As discussed in amortization expense related to divestiture of the blood screening business of $5.4 million, lower amortization expense relatedNote 6 to the Cytyc acquisition intangibles, which are being amortized based onconsolidated financial statements, we recorded an aggregate impairment charge of $30.2 million during the patternfirst quarter of economic benefits, and having one less week of expense in the current quarter as comparedfiscal 2020. The impairment charge was allocated to the corresponding period inMedical Aesthetics long-lived assets, of which $25.8 million was allocated to developed technology assets and written off to cost of revenues. During the prior year.second quarter of fiscal 2019, we recorded an aggregate impairment charge of $443.8 million. The impairment charge was allocated to the long-lived assets and $373.3 million of developed technology intangible assets and $1.3 million of equipment was written off to cost of product revenues. See Note 15 to the consolidated financial statements for additional information.

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Table of Contents
Cost of Service and Other Revenues
 
 Three Months Ended 
 December 30, 2017 December 31, 2016 Change 
 Amount 
% of
Service
Revenue
 Amount 
% of
Service
Revenue
 Amount % 
Cost of Service and Other Revenue$73.1
 52.1% $57.8
 47.8% $15.3
 26.5% 
Three Months EndedNine Months Ended
 June 27, 2020June 29, 2019ChangeJune 27, 2020June 29, 2019Change
 Amount% of
Service
Revenue		Amount% of
Service
Revenue		Amount%Amount% of
Service
Revenue		Amount% of
Service
Revenue		Amount%
Cost of Service and Other Revenue$68.8  56.8 %$93.2  62.8 %$(24.4) (26.2)%$232.7  57.5 %$264.7  59.3 %$(32.0) (12.1)%
Service and other revenues gross margin decreasedincreased to 47.9%43.2% and 42.5% in the current three and nine month period compared to 52.2%37.2% and 40.7% in the corresponding periodperiods in the prior year. The increase in the current three and nine month periods compared to the corresponding periods in the prior year is primarily due to Cynosure'sthe disposition of Medical Aesthetics as service margins for Medical Aesthetics were lower compared to the Breast Health business, which generates the majority of our service revenues. In addition, in the current three and nine month periods, the Breast Health business had lower warranty and repair costs, including personnel costs, as hospitals and healthcare centers restricted access. The decrease in revenue from installation, spare parts and training also benefited gross margin which isas these services have lower than that generated bymargins compared to service contract revenue. Partially offsetting these increases was lower license revenue in the current nine month period as the prior year period included additional one-time license revenue in the Breast Health business.
Operating Expenses
 
 Three Months EndedNine Months Ended
 June 27, 2020June 29, 2019ChangeJune 27, 2020June 29, 2019Change
 Amount% of
Total
Revenue		Amount% of
Total
Revenue		Amount%Amount% of
Total
Revenue		Amount% of
Total
Revenue		Amount%
Operating Expenses
Research and development$55.1  6.7 %$61.4  7.2 %$(6.3) (10.3)%$165.5  6.8 %$171.8  6.9 %$(6.3) (3.7)%
Selling and marketing103.5  12.6 %143.6  16.9 %(40.1) (27.9)%359.0  14.8 %423.1  16.9 %(64.1) (15.2)%
General and administrative105.3  12.8 %79.9  9.4 %25.4  31.8 %260.3  10.7 %248.5  9.9 %11.8  4.8 %
Amortization of intangible assets10.2  1.2 %11.9  1.4 %(1.7) (14.3)%29.5  1.2 %40.1  1.6 %(10.6) (26.4)%
Impairment of intangible assets and equipment—  — %—  — %—  — %4.4  0.2 %69.2  2.8 %(64.8) (93.6)%
Restructuring and Divestiture charges1.0  0.1 %2.7  0.3 %(1.7) (63.0)%4.8  0.2 %6.0  0.2 %(1.2) (20.0)%
$275.1  33.4 %$299.5  35.1 %$(24.4) (8.1)%$823.5  33.9 %$958.7  38.3 %$(135.2) (14.1)%
 Three Months Ended 
 December 30, 2017 December 31, 2016 Change 
 Amount 
% of
Total
Revenue
 Amount 
% of
Total
Revenue
 Amount % 
Operating Expenses            
Research and development$54.8
 6.9% $54.4
 7.4% $0.4
 0.8 % 
Selling and marketing139.5
 17.6% 110.0
 15.0% 29.5
 26.8 % 
General and administrative77.9
 9.9% 69.8
 9.5% 8.1
 11.6 % 
Amortization of intangible assets14.4
 1.8% 21.4
 2.9% (7.0) (32.8)% 
Restructuring and divestiture charges3.8
 0.5% 3.2
 0.4% 0.6
 18.8 % 
 $290.4
 36.7% $258.8
 35.2% $31.6
 12.2 % 
Research and Development Expenses. Research and development expenses increased 0.8%decreased 10.3% and 3.7% in the current quarterthree and nine month periods compared to the corresponding periodperiods in the prior year primarily due to the inclusiondisposition of Cynosurethe Medical Aesthetics business in the beginning of the second quarter of fiscal 2020 resulting in a decrease of $6.2 million and $13.2 million in the current three and nine month periods, respectively. Partially offsetting these decreases was higher compensation and benefits driven by higher bonus and expense from our deferred compensation plan as the expense is primarily driven by the mark-to-market of the value of the underlying investments, the addition of SSI expenses and increased spending to implement the European Medical Device Regulation (MDR) and In Vitro Diagnostic Regulation (IVDR) requirements. These increases were partially offset by a decrease in R&D consulting and project spend across the divisions as cuts or deferred spending actions were implemented in response to the effects of the COVID-19 pandemic and resources in Diagnostics were focused on the development and approval of our SARS-CoV-2 assays, and a decrease in salary expense from pay reductions and furloughs implemented in April 2020. Project spend was higher in Diagnostics including software development costs. In addition, during the current three and nine month periods, we recorded a reduction to research and development expenses of $6.5$4.7 million partially offset byfrom the divestitureBiomedical Advanced Research and Development Authority (BARDA) in connection with a grant to expand manufacturing capacity and obtain FDA approval of the blood screening business, lower project spend,our SARS-CoV-2 assays. The prior year periods included a reduction in headcount primarily in Diagnostics, and one less week of expenses compared$4.5 million charge related to the prior year firstpurchase of intellectual property in the third quarter which had 14 weeks.of fiscal 2019. At any
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point in time, we have a number of different research projects and clinical trials being conducted and the timing of these projects and related costs can vary from period to period.
Selling and Marketing Expenses. Selling and marketing expenses increased 26.8%decreased 27.9% and 15.2% in the current periodthree and nine month periods compared to the corresponding period in the prior year. The increase in the current quarter was primarily due to the inclusion of Cynosure, which contributed $33.1 million. Excluding Cynosure, expenses related to Hologic's legacy business decreased in the current quarter compared to the corresponding prior year period primarily due to lower commissions, lower spend on travel and meeting expenses, a decline in sales personnel headcount in GYN Surgical and Diagnostics and one less week of expenses, partially offset by higher salary compensation from increased headcount in Breast Health and increased spending on marketing initiatives in Diagnostics.
General and Administrative Expenses. General and administrative expenses increased 11.6% in the current quarter compared to the corresponding period in the prior year. The current three month period includes expenses related to Cynosure of $13.7 million which includes accelerated depreciation of Cynosure's SAP ERP system. Excluding Cynosure, expenses related to Hologic's legacy business decreased in the current quarter compared to the corresponding periodperiods in the prior year primarily due to resolutionthe disposition of a non-income tax matter which resultedthe Medical Aesthetics business resulting in a $4.0decrease of $29.0 million reductionand $59.0 million in the Company's expected tax liability, lower compensation from stock compensation as a result terminating certain executivescurrent three and lower measurement on performance stock units,nine month periods, respectively. In addition, in the current three and nine month periods there were decreases in travel, third party commissions, marketing initiatives, trade shows, consulting and a decrease in transaction related expensessalary expense from pay reductions and one less week of expenses,furloughs implemented in April 2020, partially offset by an increase in bonus expense and the inclusion of SSI expenses in the current three and nine month periods of $3.6 million and $11.7 million, respectively.
General and Administrative Expenses. General and administrative expenses increased 31.8% and 4.8% in the current three and nine month periods compared to the corresponding periods in the prior year primarily due to higher compensation and benefits driven by higher bonus, stock compensation and expense from our deferred compensation plan, a charitable donation of $10.0 million, an increase in bad debt expense and the addition of $1.4 million and $4.3 million, respectively, of SSI expenses. Partially offsetting these increases were lower expenses of $3.2 million and $7.6 million in the current three and nine month periods, respectively, from the disposition of the Medical Aesthetics business, credits related to services provided under the transition services agreement with Cynosure, lower travel, lower legal expenses as the prior year period included higher litigation fees.and settlement costs related to the Fuji, Enzo and Minerva lawsuits and a decrease in salary expense from pay reductions and furloughs implemented in April 2020. In addition, the current nine month period expenses were higher due to project expenses related to the Medical Aesthetics disposition including accelerated stock compensation, partially offset by acquisition-related holdback and accrual reversals.

Amortization of Intangible Assets. Amortization of intangible assets results from customer relationships, trade names, distributor relationships and business licenses related to our acquisitions. These intangible assets are generally amortized over their estimated useful lives of between 2 and 30 years using a straight-line method or, if reliably determinable, based on the pattern in which the economic benefits of the assets are expected to be consumed utilizing expected undiscounted future cash flows. Amortization expense decreased in the current quarterthree and nine month periods compared to the corresponding periodperiods in the prior year primarily due to lower amortization expense from intangible assets relatedacquired in the Cynosure acquisition as a result of impairment charges (partially offset by shortening lives of certain assets) in fiscal 2019 and the classification of the Medical Aesthetic business as assets held-for-sale in November 2019 and its subsequent disposition on December 30, 2019.
Impairment of Intangible Assets. As discussed in Note 6 to the blood screening businessconsolidated financial statements, we recorded an aggregate impairment charge of $10.4$30.2 million thatduring the first quarter of fiscal 2020. The impairment charge was disposedallocated to the Medical Aesthetics long-lived assets of duringwhich $4.4 million was written off to operating expenses. During the second quarter of fiscal 2017 and one less week of expenses. This decrease was partially offset by intangible asset amortization expense of $4.7 million as a result of the Cynosure acquisition.
Restructuring and Divestiture Charges. In fiscal 2015, we decided to shut down our Bedford, Massachusetts facility and transfer production of our Skeletal Health products to a third-party contract manufacturer and other activities to our Marlborough, Massachusetts and Danbury, Connecticut facilities. We also implemented additional organizational changes to our international operations in fiscal 2016. In addition, in connection with our acquisition of Cynosure, we implemented certain organizational changes. Pursuant to U.S. generally accepted accounting principles, the related severance and benefit charges are recognized either ratably over the respective required employee service periods or up-front for contractual benefits, and other charges are being recognized as incurred. In the current quarter,2019, we recorded chargesan aggregate impairment charge of $3.8 million for severance benefits primarily related$443.8 million. The impairment charge was allocated to the departurelong-lived assets of an executive officerwhich $69.2 million was written off to operating expenses comprised of $14.4 million to customer relationships, $31.5 million to trade names, $17.8 million to distribution agreements and employees within our Diagnostics and Medical Aesthetics segments. In the prior year period, we recorded a charge of $3.5$5.5 million related to the closure of the Bedford facility, partially offset by small adjustments to actions noted above for severance and benefits. For additional information pertaining to restructuring actions and charges, please refer toequipment. See Note 415 to the consolidated financial statements containedfor additional information.
Restructuring and Divestiture Charges. We have implemented various cost reduction initiatives to align our cost structure with our operations and related to integration activities. In addition, we have recorded divestiture charges. These actions have primarily resulted in Part I, Item 1the termination of this Quarterly Report.employees. As a result, we recorded charges of $1.0 million and $4.8 million in the current three and nine month periods, respectively, and $1.3 million and $4.8 million in the prior year three and nine month periods, respectively, primarily related to severance benefits. See Note 18 to the consolidated financial statements for additional information.
Interest Expense
 
 Three Months EndedNine Months Ended
 June 27,
2020		June 29,
2019		ChangeJune 27,
2020		June 29,
2019		Change
 AmountAmountAmount%AmountAmountAmount%
Interest Expense$(27.4) $(35.1) $7.7  (21.9)%$(91.5) $(106.0) $14.5  (13.7)%
 Three Months Ended 
 December 30,
2017		 December 31,
2016		 Change 
 Amount Amount Amount % 
Interest Expense$(41.0) $(40.4) $(0.6) 1% 


Interest expense consists primarily of the cash interest costs and the related amortization of the debt discount and deferred issuance costs on our Convertible Notes, 2022 Senior Notes, 2025 Senior Notes, and amounts borrowed under our Amended and Restated Credit Agreement and Accounts Receivable Securitization Program.outstanding debt. Interest expense in the current quarter has increasedthree and nine month periods decreased primarily due to
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a decrease in LIBOR year over year, the basis for determining interest expense under our 2018 Credit Agreement and lower interest expense from the prior year primarily due to an increaseSecuritization Program which was paid-off in full in the second quarter of fiscal 2020, partially offset by interest ratesexpense on net borrowings of $500 million on the 2018 Amended Revolver in the current nine month period and lower proceeds received under our credit facilities and issuance costs expensed frominterest rate cap agreements that hedge the refinancing ofvariable interest rate under our credit facilities in the quarter partially offset by lower interest from Convertible Note repurchasescurrent three and nine month periods compared to the corresponding periods in fiscal 2017 and fiscal 2018, and the prior year quarter had an additional week of expense.
Debt Extinguishment Loss

 Three Months Ended 
 December 30,
2017		 December 31,
2016		 Change 
 Amount Amount Amount % 
Debt Extinguishment Loss$(1.0) $—
 $(1.0) 100.0% 

In the first quarter of fiscal 2018, we entered into an Amended and Restated Credit Agreement with Bank of America, N.A. The proceeds under the Amended and Restated Credit Agreement of $1.8 billion were used, among other things, to pay off the Term Loan and Revolver outstanding under the Prior Credit Agreement. In connection with this transaction, we recorded a debt extinguishment loss of $1.0 million.

year.
Other Income, net
 
 Three Months EndedNine Months Ended
 June 27,
2020		June 29,
2019		ChangeJune 27,
2020		June 29,
2019		Change
 AmountAmountAmount%AmountAmountAmount%
Other Income, net$4.3  $2.9  $1.4  48.3 %$0.1  $5.8  $(5.7) (98.3)%
 Three Months Ended 
 December 30,
2017		 December 31,
2016		 Change 
 Amount Amount Amount % 
Other Income, net$2.9
 $10.2
 $(7.3) (71.6)% 



For the current three month period, this account primarily consisted of a gain of $1.6$5.8 million on the cash surrender value of life insurance contracts related to our deferred compensation plan driven primarily by stock market gains, partially offset by net foreign currency exchange gainslosses of $1.4 million, primarily from the mark-to marketmark-to-market of outstanding forward foreign currency exchange contracts,and foreign currency option contracts. For the third quarter of fiscal 2019, this account primarily consisted of a gain of $1.4 million on the cash surrender value of life insurance contracts related to our deferred compensation plan driven by stock marketand net foreign currency exchange gains and aof $0.7 million insurance recovery,primarily from realized gains from settling forward foreign currency contracts, partially offset by a realized loss of $0.6 million on the sale of a marketable security. For the first quarter of fiscal 2017, this account primarily consisted of gains of $8.4 million on the mark-to-market of outstanding forward foreign currency exchange contracts.
For the current nine month period, this account primarily consisted of net foreign currency exchange losses of $3.1 million primarily from mark-to-market of outstanding forward foreign currency and foreign currency option exchange contracts, duepartially offset by a net gain of $3.2 million to reflect an adjustment to remeasure our initial investment in SSI in connection with purchase accounting. For the strengthening US dollar, $0.8 million onprior year nine month period, this account primarily consisted of net foreign currency exchange gains of $4.6 million primarily from realized gains from settling forward foreign currency exchange contracts, a gain of $0.8 million on the sale of an investment and $0.8a gain of $0.5 million on the cash surrender value of life insurance contracts related to our deferred compensation plan.plans.
Provision (Benefit) for Income Taxes
 
 Three Months Ended 
 December 30,
2017		 December 31,
2016		 Change 
 Amount Amount Amount % 
Provision for Income Taxes$(310.9) $29.6
 $(340.5) ** 
 Three Months EndedNine Months Ended
 June 27,
2020		June 29,
2019		ChangeJune 27,
2020		June 29,
2019		Change
 AmountAmountAmount%AmountAmountAmount%
Provision (Benefit) for Income Taxes$32.0  $20.4  $11.6  56.9 %$(232.1) $(54.9) $(177.2) **
** Percentage not meaningful

Our effective tax rate for the three and nine months ended June 27, 2020 was a provision of 19.0% and a benefit of 60.3%, respectively, compared to a provision of 17.8% and a benefit of 40.7%, respectively, for the corresponding periods in the prior year.
Our effective tax rate for the three months ended December 30, 2017 was (324.5)% comparedJune 27, 2020 differed from the U.S. statutory tax rate primarily due to 25.5% for the corresponding period ingeographic mix of income earned by our international subsidiaries being taxed at rates lower than the prior year. The benefit recorded in the current quarter is due primarily toU.S. statutory tax rate, the impact of the Tax CutsU.S. deduction for foreign derived intangible income, and Jobs Act (the "Act") enacted on December 22, 2017. We have made reasonable estimatesreserve releases resulting from statute of limitations expirations, partially offset by the effects of the Actglobal intangible low-taxed income inclusion, and these estimates could change in future periods as we complete our analysis of the effects of the Act (refer to Note 13 of the accompanying notes to the consolidating financial statements for additional discussion). As a result of this law, US corporations are subject to lower income tax rates, and we were required to remeasure our U.S. net deferred tax liabilities at a lower rate, resulting in a net benefit of $355.2 million recorded in the provision for income taxes. Partially offsetting this benefit, we recorded a charge of $26.0 million for transition taxes related to the deemed repatriation ofunbenefited foreign earnings. For the current quarter, in addition to the items noted, thelosses. Our effective tax rate was lower thanfor the nine months ended June 27, 2020 differed from the statutory tax rate primarily due to a $312.8 million discrete net tax benefit related to the impactloss on the sale of the Medical Aesthetics business.
For the three months ended June 29, 2019, our effective tax rate differed from the U.S. statutory tax rate primarily due to reserve releases resulting from statute of limitations expirations and favorable audit settlements, and earnings in jurisdictions subject to lower tax rates. For the nine months ended June 29, 2019, our effective tax rate differed from the U.S. statutory tax rate primarily due to the effects of the Medical Aesthetics impairment charge recorded in the second quarter of fiscal 2019, earnings in jurisdictions subject to lower tax rates, a $19.2 million discrete benefit related to an internal restructuring, reserve
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releases resulting from statutes of limitations expirations and favorable audit settlements, and finalizing the domestic production activities deduction benefit. Forimpact of the three months ended December 31, 2016,enactment of the effective tax rate was lower thanTax Cuts and Jobs Act in the statutory tax rate primarily due to the tax benefit from restricted stock units upon vesting, earnings in jurisdictions subject to lower tax rates, and the domestic production activities deduction benefit.first quarter of fiscal 2019.

Segment Results of Operations
We report our business as five segments: Diagnostics, Breast Health, GYN Surgical, Medical Aesthetics GYN Surgical and Skeletal Health. We completed the disposition of the Medical Aesthetics segment on December 30, 2019 (the first day of the second quarter of fiscal 2020). The accounting policies of the segments are the same as those described in the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2017.28, 2019. We measure segment performance based on total revenues and operating income or loss.(loss). Revenues from product sales of each of these segments are described in further detail above. The discussion that follows is a summary analysis of total revenues and the primary changes in operating income or loss by segment.

Diagnostics
 
Three Months Ended  Three Months EndedNine Months Ended
December 30,
2017		 December 31,
2016		 Change  June 27,
2020		June 29,
2019		ChangeJune 27,
2020		June 29,
2019		Change
Amount Amount Amount %  AmountAmountAmount%AmountAmountAmount%
Total Revenues$284.6
 $325.4
 $(40.8) (12.5)% Total Revenues$532.2  $305.4  $226.8  74.3 %$1,163.2  $898.6  $264.6  29.4 %
Operating Income$36.5
 $41.1
 $(4.6) (11.2)% Operating Income$233.9  $45.7  $188.2  411.8 %$340.7  $120.1  $220.6  183.7 %
Operating Income as a % of Segment Revenue12.8% 12.7%     Operating Income as a % of Segment Revenue43.9 %15.0 %29.3 %13.4 %
Diagnostics revenues increased in the current three and nine month period compared to the corresponding periods in the prior year primarily due to the increase in product revenues associated with the introduction of our SARS-CoV-2 assays discussed above.

Operating income for this business segment increased in the current three and nine month periods compared to the corresponding periods in the prior year due to an increase in gross profit from higher revenues with higher gross margins, partially offset by an increase in operating expenses. Gross margin was 64.9% and 55.8% in the current three and nine month periods, respectively, compared to 47.8% and 47.5% in the corresponding periods in the prior year, respectively. The increase in gross profit was primarily due to sales of our SARS-CoV-2 assays partially offset by an increase in inventory reserves and freight costs to ship product internationally.

Operating expenses increased in the current three and nine month periods compared to the corresponding periods in the prior year primarily due to an increase in research and development expenses from higher compensation and benefits driven by higher bonus expense, increased project spend and software development costs partially offset by the BARDA $4.7 million credit, and higher compensation across other functions, an increase in bad debt expense and an allocated portion of the charitable donation. These increases were partially offset by a reduction in marketing initiatives, travel, consulting and trade shows. The increase in the nine month period was also partially offset as a result of the prior year period including a $10.5 million settlement charge related to the Enzo litigation.

Breast Health
 Three Months EndedNine Months Ended
 June 27,
2020		June 29,
2019		ChangeJune 27,
2020		June 29,
2019		Change
 AmountAmountAmount%AmountAmountAmount%
Total Revenues$224.0  $325.4  $(101.4) (31.2)%$862.8  $971.6  $(108.8) (11.2)%
Operating Income (Loss)$(11.1) $97.5  $(108.6) (111.4)%$158.6  $294.3  $(135.7) (46.1)%
Operating Income (Loss) as a % of Segment Revenue(5.0)%30.0 %18.4 %30.3 %
Breast Health revenues decreased in the current three and nine month periods compared to the corresponding periods in the prior year primarily due to a decrease of $96.5 million and $107.2 million in product revenue, respectively, discussed above and a decrease of $5.0 million and $1.6 million in service revenue, respectively. The decrease in service revenue in the current
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three and nine month periods is primarily due to lower installation, spare parts and training revenue as hospitals and healthcare centers continue to restrict access and capital expenditures continue to be delayed or cancelled due to the COVID-19 pandemic. The prior year period included additional one-time license revenue, partially offset by higher service contract revenue primarily due to continued conversion of a high percentage of the installed base of digital mammography systems to service contracts upon expiration of the warranty period. We expect the market for our products to continue to be challenging in the fourth quarter of fiscal 2020 and beyond to the extent the COVID-19 pandemic continues and hospitals and healthcare centers continue to restrict access and elective medical procedures and hospital and healthcare centers capital expenditures continue to be delayed or cancelled.

This business segment had operating losses in the current three month period compared to the corresponding period in the prior year and a decrease in operating income in the current nine month period compared to the corresponding period in the prior year due to a decrease in gross profit from lower revenues with lower gross margin and an increase in operating expenses. Gross margin was 45.4% and 53.5% in the current three and nine month periods, respectively, compared to 57.5% and 57.4% in the corresponding periods in the prior year, respectively. The decrease in gross margin was primarily due to decreased sales volume of our products, period costs related to temporary facility shut-downs and reduced manufacturing utilization, an increase in inventory reserves, and higher intangible asset amortization expense.

Operating expenses increased in the fluctuationscurrent three and nine month periods compared to the corresponding periods in product revenues discussed above. The primary driverthe prior year primarily due to higher compensation and benefits driven by higher bonus expense and increased stock compensation expenses, an increase in bad debt expense, an allocated portion of the reductioncharitable donation and the inclusion in revenues was the divestiturecurrent three and nine month periods of SSI expenses of $5.4 million and $18.1 million, respectively. These increases were partially offset by a decrease in travel expenses, market initiatives, R&D project spend, and third party commissions. The increase in the current nine month period is also driven as a result of the blood screening businessprior year period included a benefit from settling the Fuji litigation partially offset by the reversal of acquisition related accruals and a holdback in the second quarter of fiscal 2017.current nine month period.
Operating income for this business segmentGYN Surgical
 Three Months EndedNine Months Ended
 June 27,
2020		June 29,
2019		ChangeJune 27,
2020		June 29,
2019		Change
 AmountAmountAmount%AmountAmountAmount%
Total Revenues$51.5  $112.2  $(60.7) (54.1)%$275.9  $322.8  $(46.9) (14.5)%
Operating Income (Loss)$(23.4) $22.5  $(45.9) (204.0)%$32.0  $70.0  $(38.0) (54.3)%
Operating Income (Loss) as a % of Segment Revenue(45.4)%20.0 %11.6 %21.7 %
GYN Surgical revenues decreased in the current quarterthree and nine month periods compared to the corresponding periodperiods in the prior year primarily due to the decrease in gross profit from lowerproduct revenues partially offset by lowerdiscussed above. We expect the market for our products to continue to be challenging in the fourth quarter of fiscal 2020 and beyond to the extent the COVID-19 pandemic continues and hospitals and healthcare centers continue to restrict access and elective medical procedures continued to be delayed or cancelled.
This business segment had operating expenses. Gross margin was 48.0%losses in the current quarter,three month period compared with 48.8%to the corresponding period in the corresponding prior year period. Theand a decrease in gross margin was primarily due to lower revenues as a result of the disposition of the higher-margin blood screening business and lower margins generated under the new supply and collaboration arrangement. These gross margin decreases were partially offset by the impact of the increase in Aptima assay volumes, increased sales volume of Perinatal products that have high margins, favorable manufacturing variances, lower instrument sales, which have lower margins, and lower amortization expense.
Operating expenses decreasedoperating income in the current nine month period compared to the corresponding period in the prior year primarily due to a decrease in gross profit from lower amortization expense asrevenues with lower gross margins, partially offset by a result of the blood screening divestiture, lower researchdecrease in operating expenses. Gross margin was 36.7% and development expenses related to a reduction in project spending as well as the divestiture of blood screening, lower headcount, no transaction fees59.2% in the current quarter,three and one less weeknine month periods, respectively, compared to 64.8% and 64.2% in the corresponding periods in the prior year, respectively. The decrease in gross margin was primarily due to a decrease in sales volume of our products and period costs from the temporary facility shut-down and reduced manufacturing utilization.
Operating expenses decreased in the current quarter, partially offset by increased spending on marketing initiativesthree and restructuring charges.
Breast Health
 Three Months Ended 
 December 30,
2017		 December 31,
2016		 Change 
 Amount Amount Amount % 
Total Revenues$288.0
 $273.3
 $14.7
 5.4% 
Operating Income$89.7
 $85.2
 $4.5
 5.2% 
Operating Income as a % of Segment Revenue31.1% 31.2%     
Breast Health revenues increased in the current quarternine month periods compared to the corresponding periodperiods in the prior year primarily due to lower commissions from the decrease in sales, lower marketing initiative spend, decreased spending on research and development projects and a decrease in travel, partially offset by higher bonus and increased stock compensation expenses and an allocated portion of the charitable donation.

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Medical Aesthetics
 Three Months EndedNine Months Ended
 June 27,
2020		June 29,
2019		ChangeJune 27,
2020		June 29,
2019		Change
 AmountAmountAmount%AmountAmountAmount%
Total Revenues$—  $85.0  $(85.0) (100.0)%$65.3  $238.6  $(173.3) (72.6)%
Operating Loss$(1.0) $(18.6) $17.6  (94.6)%$(54.3) $(517.6) $463.3  (89.5)%
Operating Loss as a % of Segment Revenue(100.0)%(21.8)%(83.2)%(216.9)%
Medical Aesthetics revenue and operating loss decreased in the current three and nine month periods compared to the corresponding periods in the prior year primarily due to the $9.7 million increase in product revenuedivestiture of the Medical Aesthetics segment on December 30, 2019, the first day of our second quarter of fiscal 2020. We will continue to incur expenses related to legal and tax matters that we have agreed to retain. The operating loss in the current quarter discussed abovenine month period and increases of $5.0 million in service revenue.
Operating income for this business segment increased in the current quarter primarily due to the increase in gross profit from higher revenues as gross margins were consistent year over year. The overall gross margin decreased to 60.3% in the current quarter compared to 60.6% in the corresponding period in the prior year primarily due to the increase in service revenue. Higher gross margins from sales volume increasesincluded intangible assets and equipment impairment charges of $30.2 million recorded in the Affirm Prone table, the Brevera breast biopsy system,and Eviva and ATEC devices, and favorable manufacturing variances were offset by a reduction in 3D Dimensions systems, a mix shift to lower priced 3D systems and a decrease in 3D upgrades and C-View software sales, which have higher gross margins than capital equipment sales.
Operating expenses increased in the current quarter compared to the corresponding period in the prior year primarily due to increase in salary compensation from increased headcount in the Breast Health sales organization primarily due to the Medicor

acquisition in the thirdfirst quarter of fiscal 2017, increased commissions2020 and litigation expenses, partially offset by one less week of expenses.
Medical Aesthetics
 Three Months Ended 
 December 30,
2017		 December 31,
2016		 Change 
 Amount Amount Amount % 
Total Revenues$91.3
 $—
 $91.3
 100.0 % 
Operating Loss$(23.0) $—
 $(23.0) (100.0)% 
Operating Loss as a % of Segment Revenue(25.2)% —%     
Medical Aesthetics revenue increased$443.8 million recorded in the current period related to the acquisition of Cynosure.
The operating loss of $23.0 million in the current period was primarily due to amortization of intangible assets of $22.1 million, and accelerated depreciation expense for Cynosure's SAP ERP system.
GYN Surgical
 Three Months Ended 
 December 30,
2017		 December 31,
2016		 Change 
 Amount Amount Amount % 
Total Revenues$107.5
 $114.8
 $(7.3) (6.4)% 
Operating Income$30.2
 $25.5
 $4.7
 18.4 % 
Operating Income as a % of Segment Revenue28.1% 22.2%     
GYN Surgical revenues decreased in the current quarter compared to the corresponding period in the prior year primarily due to the increase in product revenues discussed above.
Operating income for this business segment increased in the current quarter compared to the corresponding period in the prior year primarily due to lower operating expenses partially offset by lower gross profit driven by lower revenues. Gross margin increased to 64.9% in the current quarter from 63.9% in the corresponding period in the prior year primarily due to a decrease in amortization expense.
Operating expenses decreased in the current quarter due to a decrease in headcount in the GYN Surgical sales organization and lower commissions, lower research and development project spend, the resolution of a tax matter which resulted in a $4.0 million reduction in the Company's expected tax liability in the currentsecond quarter of which $3.2 million was related to GYN Surgical and one less week of expenses, partially offset by an increase in litigation fees.fiscal 2019.


Skeletal Health
 
 Three Months EndedNine Months Ended
 June 27,
2020		June 29,
2019		ChangeJune 27,
2020		June 29,
2019		Change
 AmountAmountAmount%AmountAmountAmount%
Total Revenues$15.2  $24.4  $(9.2) (37.7)%$62.3  $69.8  $(7.5) (10.7)%
Operating Income (Loss)$(7.4) $(1.8) $(5.6) (311.1)%$(4.8) $(4.1) $(0.7) (17.1)%
Operating Income (Loss) as a % of Segment Revenue(48.7)%(7.4)%(7.7)%(5.9)%
 Three Months Ended 
 December 30,
2017		 December 31,
2016		 Change 
 Amount Amount Amount % 
Total Revenues$19.7
 $20.9
 $(1.2) (5.7)% 
Operating Income (Loss)$0.7
 $(5.8) $6.5
 (111.2)% 
Operating Income (Loss) as a % of Segment Revenue3.3% (27.8)%     
Skeletal Health revenues decreased in the current quarterthree and nine month periods compared to the corresponding periodperiods in the prior year primarily due to the decrease in product revenues discussed above.above. We expect the market for our products to continue to be challenging in the fourth quarter of fiscal 2020 and to a lesser extent in the first half of fiscal 2021 and beyond if the COVID-19 pandemic continues and hospitals and healthcare centers continue to restrict access and elective medical procedures continued to be delayed or cancelled.
Operating income increasedfor this business segment decreased in the current quarterthree and nine month periods compared to the corresponding periodperiods in the prior year primarily due to a $2.0 million increasedecrease in gross profit duefrom lower revenues with lower gross margins, partially offset by a decrease in operating expenses. Gross margin was 2.8% and 31.2% in the current three and nine month periods, respectively, compared to higher obsolescence charges36.9% and 37.9% in the corresponding periods in the prior year, period. Grossrespectively. The decrease in gross margin increasedwas primarily due to 46.4%lower sales volume of our products and an increase in inventory reserves.
Operating expenses decreased in the current quarter asthree and nine month periods compared to 34.3% in the corresponding periodperiods in the prior year. This business also had lower operating expensesyear primarily due to the prior year period including facility closure costs incurred for the Bedford facility of $3.5 milliona decrease in travel expenses, a decrease in trade show expenses, and we had one less week of expenses.lower commissions, partially offset by higher compensation and benefits driven by higher bonus and stock compensation expense.

LIQUIDITY AND CAPITAL RESOURCES
At December 30, 2017,June 27, 2020, we had $328.5$637.1 million of working capital and our cash and cash equivalents totaled $664.4$744.2 million. Our cash and cash equivalents balance increased by $123.8$142.4 million during the first threenine months of fiscal 20182020 primarily due to cash generated through cash flow from our core operating activities, partially offset by net repurchases and repayments of debt,cash used in financing activities.
As we assessed the potential longer term economic and capital expenditures.market uncertainties resulting from the COVID-19 pandemic, in March 2020 we suspended our accounts receivable securitization program and borrowed $750.0 million under our
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revolver. We used $250.0 million of these proceeds to pay off all amounts then owned under our accounts receivable securitization agreement, and retained the balance as cash reserves. In the third quarter of fiscal 2020, we repaid $250.0 million on amounts borrowed under our revolver. As of June 27, 2020 we had $1.0 billion available under our revolver.
In the first threenine months of fiscal 2018,2020, our operating activities provided cash of $169.1$454.6 million, primarily due to net income of $406.7$616.9 million, non-cash charges for depreciation and amortization aggregating $121.2$281.7 million, stock-based compensation expense of $16.4$53.7 million and the Medical Aesthetics non-cash interest expenseintangible asset impairment charges of $8.7 million related to our outstanding debt.$30.2 million. These adjustments to net income were partially offset by a decrease in net deferred tax liabilities of $390.7$63.3 million primarily from the change in tax rate due to tax reform, and to a lesser extent, the amortization of intangible assets.assets and intangible assets impairment charge. Cash provided by operations also includedwas negatively impacted by a net cash inflowoutflow of $4.6$488.2 million from changes in our operating assets and liabilities. ChangesThe net cash outflow was driven primarily by a $130.5 million increase in our operating assets and liabilities wereaccounts receivable primarily due to a significant percentage of sales for the quarter occurring in the third month of the quarter resulting in an increase in days sales outstanding. Cash from operations was also driven primarily by an increase in accruedprepaid expenses and other assets of $48.9$290.0 million primarily relateddue to recording a $312.8 million tax refund receivable in connection with carrying back the Medical Aesthetics' loss, a decrease in accounts payable of $55.1 million due to timing of payments, and an increase in accrued federal income taxesinventory of $48.0 million primarily due to lower Breast Health sales than anticipated due to the COVID-19 pandemic and interest on debt based on timing of payments, partially offset by lower compensation accruals, principally bonus (paid annually),increased raw materials and a reduction of prepaid income taxes of $8.1 million.inventory to support SARS-CoV-2 assay demand. These cash flow increasesoutflows were partially offset by an increase in inventory of $23.3 million as inventory levels were built up to meet anticipated demand and launch newer products, a decrease of deferred revenue of $10.6 millionaccrued expenses primarily due to meeting the required revenue recognition criteria on certain transactions and timing of invoicing of support and maintenance contracts, an increase in accounts receivableaccrued income taxes as a result of $6.4 millionhigher profits and increased accrued compensation partially offset by lower accrued legal fees due to a slight increase in days sales outstanding,less litigation and a decrease in accounts payableuse of $7.1 million based on timing of payments.outside firms has decreased.
In the first threenine months of fiscal 2018,2020, our investing activities used cash of $26.2$3.7 million primarily related to $21.8 million for capital expenditures of $98.1 million, which primarily consisted of the placement of equipment under customer usage agreements and purchases of manufacturing equipment to expand capacity of our molecular diagnostics manufacturing facilities, and computer hardware,net cash payments of $43.2 million related to the SSI, Alpha Imaging and $4.1 million to acquire Emsor.Health Beacons acquisitions. These uses of cash were primarily offset by net proceeds received from the sale of the Medical Aesthetics business of $142.7 million.
In the first threenine months of fiscal 2018,2020, our financing activities used cash of $20.3$309.0 million primarily related to $348.4 million for paymentsrepurchases of $1.3 billion to pay offour common stock on the Term Loan outstanding under the Prior Credit Agreement, $296.9open market, executing an accelerated share repurchase agreement for $205.0 million to repurchase our 2042 and 2043 Notes including accreted principal oncommon stock, $250.0 million for the 2043 Notes and conversion premium on the 2042 Notes, $225.0 millionnet repayment of net repayments on amounts borrowed under our revolving credit facilities, andthe accounts receivable securitization agreement, payments of $14.3$24.3 million for employee-relatedholdback and contingent consideration payments related to the Focal, Faxitron and Emsor acquisitions, $28.1 million for scheduled principal payments under our 2018 Credit Agreement and $12.6 million for the payment of employee taxes withheld for the net share settlement of vested restricted stock units. Partially offsetting these uses of cash were net proceeds of $1.5 billion from the Amended$500.0 million under our revolving credit line, and Restated Credit Agreement, proceeds of $350 million from issuance of the 2025 Senior Notes and $9.5$54.7 million from our equity plans, primarily from the exercise of stock options.
Debt
We had total recorded debt outstanding of $3.3$3.30 billion at December 30, 2017,June 27, 2020, which iswas comprised of amounts outstanding under our Amended and Restated2018 Credit Agreement and Amended Revolver of $1.60$1.96 billion (principal of $1.61 billion), 2022

Senior Notes of $982.6$1.97 billion, including $500.0 million (principal of $1.0 billion)on the 2018 Amended Revolver), 2025 Senior Notes of $345.0$938.9 million (principal of $350.0$950.0 million) Convertible, 2028 Senior Notes of $205.4$394.4 million (principal of $206.3$400.0 million) and amounts outstanding under the accounts receivable securitization program of $200.0 million..
Amended and Restated2018 Credit Agreement
On October 3, 2017,December 17, 2018, we enteredrefinanced our term loan and revolving credit facility by entering into an Amended and Restated Credit and Guaranty Agreement as of December 17, 2018 (the "Amended and Restated"2018 Credit Agreement") with Bank of America, N.A. in its capacity as Administrative Agent, Swing Line Lender and L/C Issuer, and certain other lenders from time to time party thereto.lenders. The Amended and Restated2018 Credit Agreement amendsamended and restatesrestated the Company's prior credit and guaranty agreement, originally datedamended and restated as of May 29, 2015 (the "PriorOctober 3, 2017 ("2017 Credit Agreement"). The proceeds under the Amended and Restated Credit Agreement of $1.8 billion were used, among other things, to pay off the Term Loan of $1.32 billion and the Revolver then outstanding under the Prior Credit Agreement. Borrowings under the Amended and Restated Credit Agreement are secured by first-priority liens on, and a first-priority security interest in, substantially all of the assets of the Company's U.S. subsidiaries, with certain exceptions.


The credit facilities (the “Amended and Restated Credit Facilities”) under the Amended and Restated2018 Credit Agreement consistconsisted of:


•A $1.5 billionmillion secured term loan to the Company ("2018 Amended Term Loan") with a maturity date of October 3, 2022;December 17, 2023; and
•A secured revolving credit facility (the "Amended"2018 Amended Revolver") under which the weCompany may borrow up to $1.5
billion, subject to certain sublimits, with a maturity date of October 3, 2022.December 17, 2023.

The borrowings of the 2018 Amended Term Loan bear interest at an annual rate equal to the Eurocurrency Rate (i.e., the LIBOR rate) plus an Applicable Rate, which was equal to 1.375% as of June 27, 2020. The borrowings of the 2018 Amended Revolver bear interest at a rate equal to the LIBOR Daily Floating Rate plus an Applicable Rate equal to 1.375% as of June 27, 2020. At the closing, we borrowed $345 millionJune 27, 2020, borrowings under the 2018 Amended Revolver, which was fully repaid during October 2017. AsTerm Loan were subject to an interest rate of December 30, 2017, the Company had $120.0 million outstanding under the Amended Revolver.1.55%.


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We are required to make scheduled principal payments under the 2018 Amended Term Loan in increasing amounts ranging from $9.375 million per three-month period commencing with the three-month period ending on December 29, 201727, 2019 to $37.5$28.125 million per three-month period commencing with the three-month period ending on December 23, 2021.29, 2022 and ending on September 29, 2023. The remaining balance of the 2018 Amended Term Loan after the scheduled principal payments, which was $1.2 billion as of June 27, 2020, and any amountsamount outstanding under the 2018 Amended Revolver, which was $500.0 million at June 27, 2020, are due at maturity. In addition, subject to the terms and conditions set forth in the Amended and Restated2018 Credit Agreement, we aremay be required to make certain mandatory prepayments from the net proceeds of specified types of asset sales (subject to certain reinvestment rights), debt issuances and insurance recoveries (subject to certain reinvestment rights). These mandatory prepayments are required to be applied by us, first, to the 2018 Amended Term Loan, second, to any outstanding amount under any Swing Line Loans, (as defined in the Amended and Restated Credit Agreement), third, to the 2018 Amended Revolver, fourth to prepay any outstanding reimbursement obligations with respect to Letters of Credit (as defined in the Amended and Restated Credit Agreement) and fifth, to cash collateralize any Letters of Credit. Subject to certain limitations, wethe Company may voluntarily prepay any of the Amended and Restated2018 Credit Facilities without premium or penalty.

Borrowings are secured by first-priority liens on, and a first-priority security interest in, substantially all of the assets of
the Company and its U.S. subsidiaries, with certain exceptions. For example, borrowings under the Prior2018 Credit Agreement are not secured by those accounts receivable that are transferred to the special purpose entity under the Company's Accounts Receivable Securitization program.

program (discussed below).
The Amended and Restated2018 Credit Agreement contains affirmative and negative covenants customarily applicable to senior secured credit facilities, including covenants restricting theour ability, of the Company, subject to negotiated exceptions, to incur additional indebtedness and grant additional liens on its assets, engage in mergers or acquisitions or dispose of assets, enter into sale-leaseback transactions, pay dividends or make other distributions, voluntarily prepay other indebtedness, enter into transactions with affiliated persons, make investments, and change the nature of their businesses. In addition, the Amended and Restated2018 Credit Agreement requires the the Companyus to maintain certain financial ratios. The Amended and Restated2018 Credit Agreement also contains customary representations and warranties and events of default, including payment defaults, breach of representations and warranties, covenant defaults, cross defaults and an event of default upon a change of control of the Company.company.


The Amended and Restated2018 Credit Agreement contains two financial covenants (a total net leverage ratio and an interest coverage ratio) measured as of the last day of each fiscal quarter and an excess cash flow prepayment requirement measured as of the end of each fiscal year.quarter. As of December 30, 2017,June 27, 2020, we were in compliance with these covenants.

The UK Financial Conduct Authority announced in 2017 that it intends to phase out LIBOR by the end of 2021. If changes are made to the method of calculating LIBOR or LIBOR ceases to exist, we may need to amend certain contracts, including our 2018 Credit Agreement and related interest rate cap and swap agreements, and we cannot predict what alternative rate or benchmark would be negotiated or the extent to which this would adversely affect our interest rate and the effectiveness of our interest rate hedging activity.

2025 Senior Notes


On October 10, 2017, we completed a private placement of $350 millionThe total aggregate principal amountbalance of 4.375%2025 Senior Notes due 2025 (the “2025 Senior Notes”) at an offering price of 100% of the aggregate principal amount of the 2025 Senior Notes.is $950.0 million. The 2025 Senior Notes are general senior unsecured obligations of the Company and are guaranteed on a senior unsecured basis by certain of the Company's domestic subsidiaries of Hologic (the “ 2025 Domestic Guarantors”).

subsidiaries. The 2025 Senior Notes were issued pursuant to an indenture, (the “2025 Indenture”), dated as of October 10, 2017 and a supplement to such indenture, dated as of January 19, 2018, each among the Company, the 2025 Domestic Guarantorsguarantors and Wells Fargo Bank, National Association, as trustee. The 2025 Senior Notes mature on October 15, 2025 and bear interest at the rate of 4.375% per year, payable semi-annually on April 15 and October 15 of each year, commencing on April 15, 2018.

We may redeem the 2025 Senior Notes at any time prior to October 15, 2020 at a price equal to 100% of the aggregate principal amount so redeemed, plus accrued and unpaid interest, if any, to the redemption date and a make-whole premium set forth in the Indenture. The CompanyWe may also redeem up to 35% of the aggregate principal amount of the 2025 Senior Notes with the net cash proceeds of certain equity offerings at any time and from time to time before October 15, 2020, at a redemption price equal to 104.375% of the aggregate principal amount so redeemed, plus accrued and unpaid interest, if any, to the redemption date. We also have the option to redeem the 2025 Senior Notes on or after: October 15, 2020 through October 14, 2021 at 102.188% of par; October 15, 2021 through October 14, 2022 at 101.094% of par; and October 15, 2022 and thereafter at 100% of par. In addition, if the Company undergoesthere is a change of control coupled with a decline in ratings, as provided in the 2025 Indenture, the Companyindenture, we will be required to make an offer to purchase each holder’s 2025 Senior Notes at a price equal to 101% of their principal amount, plus accrued and unpaid interest, if any, to the repurchase date.


On January 19, 2018, the Company completed a private placement of $1.0 billion2028 Senior Notes

The total aggregate principal amountbalance of senior notes, which included $600 million of additional 4.375%the 2028 Senior Notes due 2025, issued under a supplement to the 2025 Indenture. See “Subsequent Events” below.

2022 Senior Notes

On July 2, 2015, we issued $1.0 billion aggregate principal amount of our 2022 Senior Notes.is $400.0 million. The 20222028 Senior Notes are our general senior unsecured obligations of the Company and are guaranteed on a senior unsecured basis by certain of our the Company's
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domestic subsidiaries. The 20222028 Senior Notes were issued pursuant to an indenture, dated as of January 19, 2018, among the Company, the guarantors and Wells Fargo Bank, National Association, as trustee. The 2028 Senior Notes mature on July 15, 2022February 1, 2028 and bear interest at the rate of 5.250%4.625% per year, payable semi-annually on January 15February 1 and July 15August 1 of each year, commencing on January 15, 2016.

In connection withAugust 1, 2018. We may redeem the offering2028 Senior Notes at any time prior to February 1, 2023 at a price equal to 100% of the New 2025 Senior Notesaggregate principal amount so redeemed, plus accrued and our 4.625% Senior Notes due 2028, we called allunpaid interest, if any, to the redemption date and a make-whole premium set forth in the indenture. We may also redeem up to 35% of our outstanding 2022 Senior Notes, in the aggregate principal amount of $1.0 billion, for redemption on February 15, 2018 at an aggregate redemption price equal to the principal amount of the outstanding 20222028 Senior Notes pluswith the applicable premiumnet cash proceeds of certain equity offerings at any time and accrued and unpaid interest through the day immediately preceding the redemption date.

Convertible Notes

At December 30, 2017, our Convertible Notes, in the aggregate principal amount of $206.3 million, are recorded at $205.4 million. These notes consist of:
$206.0 million of our 2.00% Convertible Senior Notes due 2042 issued in March 2012 ("2042 Notes"); and
$0.3 million of our 2.00% Convertible Senior Notes due 2043 issued infrom time to time before February 2013 ("2043 Notes").

The 2042 Notes have conversion price of $31.175 and is subject in each case to adjustment. Holders of the 2042 Notes may convert their Convertible Notes at the applicable conversion price under certain circumstances, including without limitation (x) if the last reported sale price of our common stock exceeds 130% of the applicable conversion price for at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the preceding calendar quarter and (y) if the applicable series of Convertible Notes has been called for redemption. It is our current intent and policy to settle any conversion of the Convertible Notes as if we had elected to make either a net share settlement or all cash election, such that upon conversion, we intend to pay the holders in cash for the principal amount of the Convertible Notes and, if applicable shares of our common stock or cash to satisfy the premium based on a calculated daily conversion value.

Holders may require us to repurchase the 2042 Notes on each of March 1, 2018, 2022, 2027 and 2032, and on March 2, 2037, or upon a fundamental change, as provided in the indenture for the 2012 Notes, at a repurchase price equal to 100% of their accreted principal amount, plus accrued and unpaid interest.

We may redeem any of the 2042 Notes beginning March 6, 2018. We may redeem all or a portion of the 2042 Notes (i.e., in cash or a combination of cash and shares of our common stock)2021, at a redemption price equal to 104.625% of the aggregate principal amount so redeemed, plus accrued and unpaid interest, if any, to the redemption date. We also have the option to redeem the 2028 Senior Notes on or after: February 1, 2023 through February 1, 2024 at 102.312% of par; February 1, 2024 through February 1, 2025 at 101.541% of par; February 1, 2025 through February 1, 2026 at 100.770% of par; and February 1, 2026 and thereafter at 100% of par. In addition, if there is a change of control coupled with a decline in ratings, as provided in the indenture, we will be required to make an offer to purchase each holder’s 2028 Senior Notes at a price equal to 101% of their principal amount, plus accrued and unpaid interest, to, but excluding, the applicable redemption date.

We have recorded deferred tax liabilities related to our Convertible Notes original issuance discount, representing the spread between the stated cash coupon rate and the higher interest rate that is deductible for tax purposes based on the type of security. When our Convertible Notes are extinguished, we are required to recapture the original issuance discount previously deducted for tax purposes. The tax recapture, however, decreases as the fair market value of the Convertible Notes and the amount paid on settlement increases.

On January 29, 2018, we announced that, pursuant to the terms of the indenture governing the 2042 Notes, we had elected to redeem, on March 6, 2018, all of the then outstanding 2042 Notes at a redemption price payable in cash equal to 100% of the accreted principal amount of the 2042 Notes, plus accrued and unpaid interest, including contingent interest, if any, to but not including the redemptionrepurchase date. See “Subsequent Events” below.


Accounts Receivable Securitization Program

On April 25, 2016, we entered into a one-year $200.0 million accounts receivable securitization program (the "Securitization Program") with several of our wholly owned subsidiaries and certain financial institutions. The Securitization Program provides for annual renewals. Under the terms of the Securitization Program, we and certain of our wholly-owned subsidiaries sell our customer receivables to a bankruptcy remote special purpose entity, which is wholly-owned by us. The special purpose entity, as borrower, and we, as servicer, have entered into a Credit and Security Agreement with several lenders pursuant to which the special purpose entity may borrow from the lenders up to $200.0 million,the maximum borrowing amount allowed, with the loans secured by the receivables. The amount that the special purpose entity may borrow at a given point in time is determined based on the amount of qualifying receivables that are present in the special purpose entity at such point in time. On April 21, 2017, we entered into an amendment to extend the Securitization Program an additional year to April 20, 2018. The amendment allows us to continue to borrow up to $200.0 million and due to structural changes to the terms, the borrowing base has fewer limitations. As of December 30, 2017, $200.0 million was outstanding under the Securitization Program. The assets of the special purpose entity secure the amounts borrowed and cannot be used to pay our other debts or liabilities.
The
Effective April 18, 2019, we entered into an amendment to extend the Securitization Program an additional year to April 17, 2020. Under the amendment, the maximum borrowing amount increased from $225.0 million to $250.0 million. On April 13, 2020, we amended the Credit and Security Agreement contains customary representationsagreement with the lenders, temporarily suspending the ability to borrow and warranties and events of default, including payment defaults, breach of representations and warranties, covenant defaults, and an event of default uponthe need to comply with covenants for up to a change of control. In addition, it contains financial covenants consistent with that of the Prior Credit Agreement.year. As of December 30, 2017,June 27, 2020, we were in compliance with these covenants.did not have any borrowings under this program.
Subsequent Events
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2025 Senior Notes and 2028 Senior Notes
On January 19, 2018, we completed a private placement of $1.0 billion aggregate principal amount of senior notes, allocated between (i) an additional $600 million aggregate principal amounts of our 2025 Senior Notes (the "New 2025 Senior Notes") at an offering price of 100% of the aggregate principal amount of the 2025 Senior Notes, plus accrued and unpaid interest from October 10, 2017 and (ii) $400 million aggregate principal amounts of our 4.625% Senior Notes due 2028 (the "2028 Senior Notes") at an offering price of 100% of the aggregate principal amount of the 2028 Senior Notes. The New 2025 Senior Notes have the same terms as the existing 2025 Senior Notes. The 2028 Senior Notes are general senior unsecured obligations of the Company and are guaranteed on a senior unsecured basis by certain domestic subsidiaries of Hologic (the “2028 Domestic Guarantors”). In connection with the offering of the New Notes, we called all of our outstanding 2022 Senior Notes, in aggregate principal amount of $1.0 billion, for redemption on February 15, 2018 at an aggregate redemption price equal to the principal amount of the outstanding 2022 Senior Notes, plus the applicable premium and accrued and unpaid interest through the day immediately preceding the redemption date.

The 2028 Senior Notes were issued pursuant to an indenture (the “2028 Indenture”), dated as of January 19, 2018 among the Company, the 2028 Domestic Guarantors and Wells Fargo Bank, National Association, as trustee. The 2028 Senior Notes mature on February 1, 2028 and bear interest at the rate of 4.625% per year, payable semi-annually on February 1 and August 1 of each year, commencing on August 1, 2018. The 2028 Indenture contains covenants which limit, among other things, the ability of the Company and the Guarantors to create liens and engage in certain sale and leaseback transactions. These covenants are subject to a number exceptions and qualifications.


We may redeem the 2028 Senior Notes at any time prior to February 1, 2023 at a price equal to 100% of the aggregate principal amount so redeemed, plus accrued and unpaid interest, if any, to the redemption date and a make-whole premium set forth in the Indenture. The Company may also redeem up to 35% of the aggregate principal amount of the 2028 Senior Notes with the net cash proceeds of certain equity offerings at any time and from time to time before February 1, 2021, at a redemption price equal to 104.625% of the aggregate principal amount so redeemed, plus accrued and unpaid interest, if any, to the redemption date. The Company also has the option to redeem the 2028 Senior Notes on or after: February 1, 2023 through February 1, 2024 at 102.312% of par; February 1, 2024 through February 1, 2025 at 101.541% of par; February 1, 2025 through February 1, 2026 at 100.770% of par; and February 1, 2026 and thereafter at 100% of par. In addition, if we undergo a change of control coupled with a decline in ratings, as provided in the 2028 Indenture, we will be required to make an offer to purchase each holder’s 2028 Senior Notes at a price equal to 101% of their principal amount, plus accrued and unpaid interest, if any, to the repurchase date.
2042 Notes
On January 29, 2018, we announced that pursuant to the terms of the indenture governing the 2042 Notes, holders of the 2042 Notes had the option of requiring us to repurchase their 2042 Notes on March 1, 2018 at a repurchase price payable in cash equal to 100% of the accreted principal amount of the 2042 Notes, plus accrued and unpaid interest to, but not including the put date. The accreted principal amount of the 2042 notes will be $206.0 million as of the repurchase date. We also announced on January 29, 2018 that, pursuant to the terms of the indenture governing the 2042 Notes, we had elected to redeem, on March 6, 2018, all of the then outstanding 2042 Notes at a redemption price payable in cash equal to 100% of the accreted principal amount of the 2042 Notes, plus accrued and unpaid interest, including contingent interest, if any, to, but not including the redemption date. Holders also have a right to convert their 2042 Notes in accordance with the terms of the indenture. If the closing price of our common stock exceeds the conversion price of the 2042 notes, which is $31.175 per share, holders of the 2042 Notes will likely exercise their conversion rights prior to the redemption date as they would receive more value upon conversion compared to redemption. Based on a closing price of our common stock of $42.75 per share (the closing price for our common stock on December 29, 2017), the conversion value for the outstanding 2042 notes would be $1,371 per $1,000 of original principal amount of the notes, or $282.6 million in the aggregate. The conversion value of the notes would increase or decrease to the extent that the trading price of our common stock increases or decreases. We have elected to settle any conversion of the 2042 Notes entirely in cash.
Stock Repurchase Program
On June 21, 2016,13, 2018, the Board of Directors authorized thea share repurchase ofplan to repurchase up to $500.0 million of our outstanding common stock. This share repurchase plan was effective August 1, 2018 and expired on March 27, 2020.
On December 11, 2019, the Company'sBoard of Directors authorized a new share repurchase plan to repurchase up to $500.0 million of our outstanding common stock, overeffective at the next five yearsbeginning of the third quarter of fiscal 2020. On March 2, 2020, the Board of Directors approved accelerating the effective date of the new share repurchase plan from March 27, 2020 to March 2, 2020. Under this revised authorization, during the second quarter of fiscal 2020, we repurchased 3.5 million shares of our common stock for a total consideration of $137.5 million.
On November 19, 2019, the Board of Directors authorized us to repurchase up to $205 million of its outstanding shares pursuant to an accelerated share repurchase ("ASR") agreement. On November 22, 2019, we executed the ASR agreement with Goldman Sachs & Co. ("Goldman Sachs") pursuant to which $300.0we repurchased $205 million remains availableof our common stock. The initial delivery of approximately 80% of the shares under the ASR was 3.3 million shares for repurchasewhich we initially allocated $164.0 million of the $205 million paid to Goldman Sachs during the first quarter of fiscal 2020. Final settlement of the transaction under this authorization asthe ASR occurred in the second quarter of December 30, 2017. fiscal 2020. At settlement, Goldman Sachs delivered an additional 0.6 million shares of the Company's common stock.
There were no share repurchases during the third quarter of common stock madefiscal 2020. As of June 27, 2020, $362.6 million remained available under this authorization during the quarter ended December 30, 2017.authorization.
Legal Contingencies
We are currently involved in several legal proceedings and claims. In connection with these legal proceedings and claims, management periodically reviews estimates of potential costs to be incurred by us in connection with the adjudication or settlement, if any, of these proceedings. These estimates are developed, as applicable in consultation with outside counsel, and are based on an analysis of potential litigation outcomes and settlement strategies. In accordance with ASC 450, Contingencies, loss contingencies are accrued if, in the opinion of management, an adverse outcome is probable and such financial outcome can be reasonably estimated. It is possible that future results for any particular quarter or annual period may be materially affected by changes in our assumptions or the effectiveness of our strategies relating to these proceedings. Information with respect to this disclosure may be found in Note 79 to the Consolidated Financial Statements in this Quarterly Report on Form 10-Q, which information is incorporated herein by reference.

Future Liquidity Considerations


We intend to use the net proceeds from the sale of our New 2025 Senior Notes and our 2028 Senior Notes and available cash, which may include borrowings under our Amended Revolver, to redeem our outstanding 2022 Senior Notes on February 15, 2018. Additionally, we intend to use the net proceeds from the sale of our 2025 Senior Notes, our Amended and Restated Credit Agreement and available cash, which may include borrowings under our Amended Revolver, to redeem or repurchase all of our outstanding Convertible Notes in the second quarter of fiscal 2018. We also expect to continue to review and evaluate potential strategic transactions and alliances that we believe will complement our current or future business. Subject to the

“Risk “Risk Factors” set forth in Part II, Item 1A of this Quarterly Report, as well as those described in our Annual Report on Form 10-K for the fiscal year ended September 30, 2017,28, 2019 or any other of our subsequently filed reports, including, without limitation, our Quarterly Report on Form 10-Q for the fiscal Quarter ended March 28, 2020, and the general disclaimers set forth in our Special Note Regarding Forward-Looking Statements at the outset of this Quarterly Report,MD&A, we believe that our cash and cash equivalents, cash flows from operations, and the cash available under our 2018 Amended Revolver and our Securitization Program will provide us with sufficient funds in order to fund our expected normal operations and debt payments including interest and potential payouts for any Convertible Notes, and the costs of redeeming our outstanding 2022 Senior Notes, including payment of any premium, over the next twelve months. Our longer-term liquidity is contingent upon future operating performance. We may also require additional capital in the future to fund capital expenditures, repayment of debt, and related deferred tax liabilities, as applicable, acquisitions, strategic transactions or other investments.
As described above, we have significant indebtedness outstanding under our Amended and Restated2018 Credit Agreement, 2022 Senior Notes, 2025 Senior Notes, and 2028 Senior Notes, Convertible Notes and the Securitization Program.Notes. These capital requirements could be substantial. The terms of our financing obligations contain covenants that restrict our ability to engage in certain transactions and, if not met, may impair our ability to respond to changing business and economic conditions. Moreover, our credit facilities also require us to satisfy certain financial covenants. Should our future business and operations be significantly impaired by the continuing COVID-19 pandemic and associated economic disruptions or otherwise, we cannot assure that we will remain in compliance with our current financial covenants. In such event, the factors that adversely affect our business may also similarly adversely affect the capital markets, and we cannot assure that we would be able to negotiate alternative covenants or alternative financing on favorable terms if at all. Our failure to comply with the covenants contained in our amended and restated credit facilities, including financial covenants, could result in an event of default, which could materially and adversely affect our results of operations and financial condition. For a description of risks to our operating performance and our indebtedness, see “Risk Factors” set forth in Part II, Item 1A of this Quarterly Report, as well as those described in Part I, Item 1A in our Annual Report on Form 10-K for the fiscal year ended September 30, 2017.28, 2019.
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CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The discussion and analysis of our financial condition and results of operations are based upon our interim consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles.principles ("GAAP"). The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to revenue recognition for multiple element arrangements, allowance for doubtful accounts, reserves for excess and obsolete inventories, valuations, purchase price allocations and contingent consideration related to business combinations, expected future cash flows including growth rates, discount rates, terminal values and other assumptions used to evaluate the recoverability of long-lived assets and goodwill, estimated fair values of intangible assets and goodwill, amortization methods and periods, warranty reserves, certain accrued expenses, restructuring and other related charges, stock-based compensation, contingent liabilities, tax reserves and recoverability of our net deferred tax assets and related valuation allowances. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates if past experience or other assumptions do not turn out to be substantially accurate. Any differences may have a material impact on our financial condition and results of operations. For a discussion of how these and other factors may affect our business, see the “Cautionary Statement” above and “Risk Factors” set forth in Part II, Item 1A of this Quarterly Report as well as those described in our Annual Report on Form 10-K for the fiscal year ended September 30, 2017.28, 2019 or any other of our subsequently filed reports.
The critical accounting estimates that we believe affect our more significant judgments and estimates used in the preparation of our consolidated financial statements presented in this report are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations and in the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2017.28, 2019. There have been no material changes to our critical accounting policies or estimates from those set forth in our Annual Report on Form 10-K for the fiscal year ended September 30, 2017.28, 2019.


Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Financial Instruments, Other Financial Instruments, and Derivative Commodity Instruments. Financial instruments consist of cash and cash equivalents, accounts receivable, cost-method equity investments, insuranceforeign currency contracts, and related deferred compensation plan liabilities, interest rate cap and interest rate swap agreements, forward foreign currencyinsurance contracts, accounts payable and debt obligations. Except for our outstanding Convertible Notes, 20222025 Senior Notes and 20252028 Senior Notes, the fair value of these financial instruments approximates their carrying amount. As of December 30, 2017, we have $206.3 million in principal amount of Convertible Notes outstanding. The fair value of our 2042 Notes and 2043 Notes as of December 30, 2017 was approximately $284.8 million and $0.3 million, respectively. The fair value of our 20222025 Senior Notes and 20252028 Senior Notes as of December 30, 2017June 27, 2020 was approximately $1.10 billion$959.7 million and $358.6$418.0 million, respectively. Amounts outstanding under our Amended and Restated2018 Credit Agreement and Securitization Program of $1.61$2.0 billion and $200.0 million, respectively, as of December 30, 2017June 27, 2020 are subject to variable rates of interest based on current market rates, and as such, we believe the carrying amount of these obligations approximates fair value.
Primary Market Risk Exposures. Our primary market risk exposure is in the areas of interest rate risk and foreign currency exchange rate risk. We incur interest expense on borrowings outstanding under our Convertible2025 Senior Notes, 20222028 Senior Notes and 2018 Credit Agreement. The 2025 Senior Notes and Amended and Restated Credit Agreement, as well as under our accounts receivable securitization program. The Convertible Notes, 2022 Senior Notes, and 20252028 Senior Notes have fixed interest rates. Borrowings under our Amended and Restated2018 Credit Agreement currently bear interest at the Eurocurrency Rate (i.e., Libor)LIBOR) plus the applicable margin of 1.50%1.375% per annum. Borrowings under our accounts receivable securitization program currently bear interest at Libor plus the applicable margin of 0.7%.

As noted above, as of December 30, 2017,June 27, 2020, there was $1.61$1.97 billion of aggregate principal outstanding under the Amended and Restated2018 Credit Agreement, including amounts borrowed under the Amended Revolver, and $200.0 million aggregate principal outstanding under the securitization program.Agreement. Since these debt obligations are variable rate instruments, our interest expense associated with these instruments is subject to change. A hypothetical 10% adverse movement (increase in LIBOR rate) would increase annual interest expense by approximately $2.4$0.4 million. We entered into multiple interest rate cap agreements and an interest rate swap agreement to help mitigate the interest rate volatility associated with the variable rate interest on the amounts outstanding. The critical terms of the interest rate caps and interest rate swap were designed to mirror the terms of our LIBOR-based borrowings under the Prior2018 Credit Agreement and prior credit agreement, and therefore the interest rate caps and interest rate swap are highly effective at offsetting the cash flows being hedged. We designated these derivatives as cash flow hedges of the variability of the LIBOR-based interest payments on $1.0 billion of principal which endsprincipal. These interest rate cap agreements expire through December 23, 2020, and the interest rate swap contract expires on December 28, 2018.17, 2023.
The UK Financial Conduct Authority announced in 2017 that it intends to phase out LIBOR by the end of 2021. If changes are made to the method of calculating LIBOR or LIBOR ceases to exist, we may need to amend certain contracts, including our 2018 Credit Agreement and related interest rate cap and swap agreements, and we cannot predict what alternative
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rate or benchmark would be negotiated or the extent to which this would adversely affect our interest rate and the effectiveness of our interest rate hedging activity.
The return from cash and cash equivalents will vary as short-term interest rates change. A hypothetical 10% increase or decrease in interest rates, however, would not have a material adverse effect on our business, financial condition or results of operations.
Foreign Currency Exchange Risk. Our international business is subject to risks, including, but not limited to: unique economic conditions, changes in political climate, differing tax structures, other regulations and restrictions, and foreign exchange rate volatility. Accordingly, our future results could be materially adversely impacted by changes in these or other factors.


We conduct business worldwide and maintain sales and service offices outside the United States as well as manufacturing facilities in Costa Rica and the United Kingdom. Our international sales are denominated in a number of currencies, primarily the Euro, U.S. dollar, UK Pound and Renminbi. The majority of our foreign subsidiaries' functional currency is the local currency, although certain foreign subsidiaries functional currency is the U.S. dollar based on the nature of their operations or functions. Our revenues denominated in foreign currencies are positively affected when the U.S. dollar weakens against them and adversely effectedaffected when the U.S. dollar strengthens. Fluctuations in foreign currency rates could affect our sales, cost of goods and operating margins and could result in exchange losses. In addition, currency devaluations can result in a loss if we hold deposits of that currency. We have executed forward foreign currency contracts and foreign currency option contracts to hedge a portion of results denominated in the Euro, UK Pound, Australian dollar, Japanese Yen, Chinese Yuan and Canadian dollar. These contracts do not qualify for hedge accounting. As a result, we may experience volatility in our Consolidated Statements of IncomeOperations due to (i) the impact of unrealized gains and losses reported in other income, net onfrom the mark-to-market of outstanding contracts and (ii) realized gains and losses recognized in other income, net, whereas the offsetting economic gains and losses are reported in the line item of the underlying cash flow, for example, revenue.
We believe that the operating expenses of our international subsidiaries that are incurred in local currencies will not have a material adverse effect on our business, results of operations or financial condition. Our operating results and certain assets and liabilities that are denominated in foreign currencies are affected by changes in the relative strength of the U.S. dollar against those currencies. Our expenses, denominated in foreign currencies, are positively affected when the U.S. dollar strengthens against them and adversely affected when the U.S. dollar weakens. However, we believe that the foreign currency exchange risk is not significant. A hypothetical 10% increase or decrease in foreign currencies in which we transact would not have a material adverse impact on our business, financial condition or results of operations.

Item 4. Controls and Procedures.
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As of December 30, 2017,June 27, 2020, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934.Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective as of December 30, 2017.

June 27, 2020.
An evaluation was also performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of any change in our internal control over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. That evaluation did not identify any change in our internal control over financial reporting that occurred during our latest fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
Information with respect to this Item may be found in Note 79 to the Consolidated Financial Statements in this Quarterly Report on Form 10-Q, which information is incorporated herein by reference.
Additional information on our commitments and contingencies can be found in our Annual Report on Form 10-K for our fiscal year ended September 30, 2017.28, 2019.

Item 1A. Risk Factors.


There are no material changes from the risk factors as previously disclosed in our Annual Report on Form 10-K for our fiscal year ended September 30, 2017,28, 2019 or any of our subsequently filed reports, except for as noteddescribed below.
The
We may not realize anticipated revenue from our COVID-19 diagnostic assays and additional resources allocated to our Diagnostics business may negatively impact our other development programs or production capacities.

We have developed assays to detect the virus causing COVID-19. While we have seen significant demand for our COVID assays, other companies are working to produce or have produced tests for COVID-19 which may lead to the diversion of customers as well as governmental and quasi-governmental entities away from us and toward other companies. In addition, given the significant demand for our COVID assays as well as for our Panther systems on which the assays run, we have devoted significant financial resources and personnel to scaling up production of the assay and our Panther systems. This resource allocation may cause delays in or otherwise negatively impact our other development programs or production capacities. Our business could be negatively impacted by our allocation of significant resources to a global health threat that is unpredictable and that could dissipate. There is no guarantee that current or anticipated demand will continue, or if demand does continue, that we will be able to produce in quantities to meet the demand.

We refer you to “Management’s Discussion and Analysis of Financial Position and Results of Operations” for a more detailed discussions of the potential impact of recently enacted U.S. tax laws is not yet clear.the COVID-19 pandemic and associated economic disruptions.


Congress recently enacted legislation commonly known as “ The Tax Cuts and Jobs Act” (the “Act”). The Act made significant changes to U.S. federal income tax laws. Certain provisions
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Table of the Act could have an adverse effect on the financial condition of the Company or its affiliates. The interpretations of many provisions of the Act are still unclear. We cannot predict when or to what extent any U.S. federal tax laws, regulations, interpretations, or rulings clarifying the Act will be issued or the impact of any such guidance on the Company. Certain key provisions of the Act that could impact us include, but are not limited to international tax provisions that affect the overall tax rate applicable to income earned from non-U.S. operations, limitations on the deductibility of executive compensation and limitations on a taxpayer’s net interest expense deduction.Contents


Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Issuer's Purchases of Equity Securities

Period of Repurchase
Total Number of
Shares Purchased
(#) (1)
 
Average Price
Paid Per Share
($) (1)
 
Total Number of
Shares Purchased As Part of Publicly
Announced Plans or Programs 
(#) (2)
 Average Price Paid Per Share As Part of Publicly Announced Plans or Programs($) (2) 
Maximum
Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under Our
Programs
(in millions) ($) (2)
October 1, 2017 – October 28, 2017610
 $37.01
 —
 $—
 $300.0
October 29, 2017 – November 25, 2017251,463
 39.61
 —
 —
 300.0
November 26, 2017 – December 30, 2017106,078
 40.92
 —
 —
 300.0
Total358,151
 $39.99
 —
 $—
 $300.0
Period of RepurchaseTotal Number of
Shares Purchased
(#) (1)		Average Price
Paid Per Share
($) (1)		Total Number of
Shares Purchased As Part of Publicly
Announced Plans or Programs 
(#) (2)		Average Price Paid Per Share As Part of Publicly Announced Plans or Programs($) (2)Maximum
Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under Our
Programs
(in millions) ($) (2) (3)
March 29, 2020 – April 25, 20201,764  $32.70  —  $—  $362.6  
April 26, 2020 – May 23, 20201,585  49.40  —  —  362.6  
May 24, 2020 – June 27, 2020628  53.25  —  —  362.6  
Total3,977  $42.60  —  $—  $362.6  
 ___________________________________
(1)For the majority of restricted stock units granted, the number of shares issued on the date that the restricted stock units vest is net of the minimum statutory tax withholding requirements that we pay in cash to the appropriate taxing authorities on behalf of our employees. These repurchases of our common stock were to cover employee income tax withholding obligations in connection with the vesting of restricted stock units under our equity incentive plans.
(2)On June 21, 2016, the Board of Directors authorized the repurchase of up to an additional $500.0 million of our outstanding common stock over the next five years. There were no repurchases of common stock made under this authorization during the quarter ended December 30, 2017.

(1)For the majority of restricted stock units granted, the number of shares issued on the date that the restricted stock units vest is net of the minimum statutory tax withholding requirements that we pay in cash to the appropriate taxing authorities on behalf of our employees. These repurchases of our common stock were to cover employee income tax withholding obligations in connection with the vesting of restricted stock units under our equity incentive plans.


(2)On June 13, 2018, the Board of Directors authorized another share repurchase plan to repurchase up to $500.0 million of our outstanding common stock. This share repurchase plan, which replaced the prior plan, was effective August 1, 2018 and expires on March 27, 2020. On December 11, 2019, the Board of Directors authorized a new share repurchase plan to repurchase up to $500.0 million of our outstanding common stock, effective at the beginning of the third quarter of fiscal 2020. On March 2, 2020, the Board of Directors approved accelerating the effective date of the new share repurchase plan from March 27, 2020 to March 2, 2020.

(3)On November 22, 2019, Board of Directors authorized the further repurchase of up to $205 million of our outstanding shares pursuant to an accelerated share repurchase ("ASR") agreement with Goldman Sachs. Under the ASR, Hologic agreed to purchase $205 million of Hologic’s common stock. The initial delivery was 3.3 million shares for which the Company has initially allocated $164.0 million of the $205 million paid to Goldman Sachs, based on the current market price of $50.02. The ASR was completed in the second quarter of fiscal 2020. At settlement, Goldman Sachs delivered an additional 0.6 million shares of the Company’s common stock.


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Item 6. Exhibits.
(a) Exhibits
Incorporated by
Reference
Exhibit
Number		Exhibit DescriptionFormFiling Date/
Period End
Date
Incorporated by
Reference
Exhibit
Number
Exhibit DescriptionForm
Filing Date/
Period End
Date
4.1
Indenture dated October 10, 2017, by and among Hologic, the Guarantors party thereto and Wells Fargo Bank, National Association, as Trustee.
8-K10/10/2017
4.2
Form of 4.375% Senior Note due 2025 (included in Exhibit 4.1).
8-K10/10/2017
4.3
First Supplemental Indenture dated January 19, 2018, by and among Hologic, the Guarantors party thereto and Wells Fargo Bank, National Association, as Trustee
8-K1/19/2018
4.4
Indenture dated January 19, 2018, by and among Hologic, the guarantors party thereto and Wells Fargo Bank, National Association, as Trustee.
8-K1/19/2018
4.5
Form of 4.625% Senior Note due 2028 (included in Exhibit 4.4).
8-K1/19/2018
10.1
Amended and Restated Credit and Guaranty Agreement, originally dated as of May 29, 2015 and amended and restated as of October  3, 2017, among Hologic, Hologic GGO 4 Ltd, Hologic UK Finance LTD and each other Designated Borrower from time to time party thereto, the Guarantors from time to time party thereto, each Lender from time to time party thereto and Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer.
8-K10/4/2017
10.2
Form of Performance Stock Unit Award Agreement (ROIC) (adopted fiscal 2018)
.8-K11/9/2017
10.3
Form of Performance Stock Unit Award Agreement (relative TSR) (adopted fiscal 2018)
8-K11/9/2017
31.1*
10.48-K12/1/2017
10.5*†

Addendum No. 3 to Current Lease by and Between BCR Fondo de Inversion Inmobiliario and Hologic Surgical Products Costa Rica S.R.L.
31.1*
Certification of Hologic’s CEO pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
32.1**
32.2**
101.INS*XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*XBRL Taxonomy Extension Schema Document
101.CAL*XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB*XBRL Taxonomy Extension Label Linkbase Document
101.PRE*XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF*XBRL Taxonomy Extension Definition
_______________



* Filed herewith.
** Furnished herewith.
†    Confidential treatment has been requested as to portions





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Table of the exhibit. Confidential materials omitted and filed separately with the Securities and Exchange Commission.Contents


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
Hologic, Inc.
(Registrant)
Date:July 29, 2020Hologic, Inc.
(Registrant)
Date:February 8, 2018/s/    Stephen P. MacMillan        
Stephen P. MacMillan

Chairman, President and Chief Executive Officer

(Principal Executive Officer)
Date:February 8, 2018July 29, 2020/s/    Robert W. McMahon        Karleen M. Oberton        
Robert W. McMahonKarleen M. Oberton
Chief Financial Officer

(Principal Financial Officer)



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